H. Making the Agreement Take Effect

• Library: Crafting Effective Settlement Agreements: A Guidebook for Attorneys and Mediators (ABA) (2018 Ed.)

H. Making the Agreement Take Effect

The difference between an autograph and a signature is that one is valuable by itself and the other only for what it does. The difference between a legible and an illegible signature is about three years of law school.

The final part of a settlement agreement involves making it legally valid. This usually means collecting signatures from persons with authority to sign for themselves or on behalf of a settling party. This final part often includes additional terms intended to increase the likelihood that the settlement agreement will withstand any legal challenge to its effectiveness.

1. Special Statutory Requirements for Settlement Agreement Language and Typography

Don't believe in magical incantations? Try enforcing a California settlement agreement lacking words "providing that the agreement is enforceable or binding or words to that effect."

Some states have special statutes imposing mandatory language or specific typography to which parties must adhere to ensure the validity of their settlement agreements. Although the legislative intent underlying these special statutes is usually admirable, such as to admonish parties before they surrender valuable rights, the practical reality is that these requirements serve as traps for unwary drafters.

One notorious example arose in Haghighi v. Russian-American Broadcasting Co., where the Eighth Circuit invalidated a settlement agreement between two sophisticated businesses simply because it did not meet the former Minnesota statute's requirement that "an enforceable settlement agreement state it is binding."³⁴⁰ Minnesota's Civil Mediation Act renders invalid any settlement agreement that fails to state that (1) the mediator has no duty to protect their interests or provide them with information about their legal rights, (2) signing a mediated settlement agreement may adversely affect their legal rights, and (3) they should consult an attorney before signing a mediated settlement agreement if they are uncertain of their rights.³⁴¹

California requires that a settlement "agreement provides that it is enforceable or binding or words to that effect."³⁴² As to this requirement, the California Supreme Court observed that "[p]arties overlooking this requirement may inadvertently enter into a written settlement agreement that is unenforceable because it is inadmissible."³⁴³ In addition, California requires that a release of unknown claims be accomplished by expressly setting forth the language of California Civil Code section 1542 to advise parties that: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."

Settlement agreements involving child support may require specific recitals of changed circumstances from preexisting orders or an express election to opt out from presumptive support guidelines in order to ensure a valid agreement.³⁴⁴ Although these types of special statutes may be traps for the unprepared, consultation with local practice guides will reveal any locally applicable statutory quirks.

More difficult to satisfy are ambiguous standards for typography or readability. A mediated dissolution agreement in Texas must provide, "in a prominently displayed statement that is in boldfaced type or capital letters or underlined, that the agreement is not subject to revocation," and must be signed by each party and any attorney present at the time the agreement is made.³⁴⁵ In addition to satisfying these typography requirements, drafters must also take care not to print the type in a font that is too small.³⁴⁶

2. Notice and Delivery

To fulfill the terms of a settlement agreement, parties usually must communicate and send each other documents. Defendants usually send a check for the settlement amount, parties often cooperate on stipulations to be filed in court, and sometimes they give the other party notice when they believe a breach of the agreement has occurred. A settlement agreement should include a notice and delivery section that specifies exactly who is authorized to receive notices, documents, and checks on behalf of a party. Once upon a time, a physical mailing address sufficed. Today, it makes sense to include an e-mail address at which parties can receive e-mails and electronic documents. To account for the myriad ways in which people communicate, a notice and delivery section should specify:

• How must physical delivery be accomplished? By any manner of mailing? Certified mail only? Certified or express mail?
• Whether e-mail is an acceptable substitute for written communications? Including notices of breach and cure?
• Whether documents may be transmitted by e-mail? May original documents may be scanned and transmitted electronically in lieu of physical delivery? Must the original documents also be transmitted physically? Must sensitive documents be encrypted if transmitted electronically?

In Daven v. Douglas, the parties expressly address how delivery may be made under terms of the settlement agreement. Rather than limiting themselves to postal mail and email, the parties expressly provide for encrypted electronic communications as follows:

27. Notice and delivery. All notices and delivery of documents under this agreement must be made either (i) in a writing delivered in person or by delivery service in a manner scheduled to require two days or less for transport and with a tracking number to the recipient, or (ii) by e-mail, provided that any documents be encrypted and in Adobe Acrobat format. Prior to the transmission of any encrypted document, the sender shall call the recipient by telephone to orally transmit the encryption password. The encryption password must not be recorded in voicemail or any other medium. Notice to Douglas must be delivered to Chris Kendall, Attorney at Law, Front Street Law Group, 3 Front Street, Bridgeton, CA 99999. Email: ckendall@ frontstreetlaw.com. Telephone: 605-475-6968. Notice to Daven must be delivered to Takao Normish, Esq., P.O. Box 72453, Bridgeton, CA 99999. Email: tkn@filiuslaw.com. Telephone: 605-475-6958.

As this example shows, parties can address matters of security in electronic transmissions that will safeguard sensitive or confidential information and do so with a relative economy of words.

3. Copies

Every party will want an original copy of the agreement that settles the case. The solution is to execute multiple identical copies of the settlement agreement. To accomplish this, the agreement should include a provision that the settlement is executed in multiple copies, each of which constitutes a binding original. For example, in Jeffener v. Vostferous, the parties address this issue as follows:

19. Counterparts. This agreement may be executed in multiple counterparts, each of which serves as an original with the same effect as if all parties had signed the same counterpart. All counterparts together constitute one agreement. A single counterpart suffices as proof of this agreement.

Note that counterparts are easy to accomplish even late at night when a mediation results in a hand-written settlement agreement. I've never encountered a problem with parties photocopying the handwritten agreement, signing each photocopy, and destroying the handwritten "original" so that everyone has an identical signed copy.

Problems are most likely to arise when there are multiple versions of a settlement agreement floating around. Consider the sad tale of Lawrence Silverstein, who prepared six different copies of post-nuptial agreements for Frank and Jamie McCourt that looked the same but differed in which one of the divorcing spouses would retain ownership of the Los Angeles Dodgers sports team.³⁴⁷ Of the copies, three gave Frank sole ownership of the franchise, and three gave Frank equal ownership with Jamie. "After he discovered...