I. Unintentionally Valid Settlement Agreements and Accidentally Negated or Modified Settlement Agreements

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

I. Unintentionally Valid Settlement Agreements and Accidentally Negated or Modified Settlement Agreements

Want to know how to prevent parties from accidentally undermining a beautifully drafted and signed settlement agreement? Me too!

This section sounds a cautionary note: beware that a written settlement agreement can be undermined by the subsequent conduct of the parties or become binding before the parties realize it has become binding. Unfortunately, "[t]here is nothing sacrosanct about a written agreement. Granted that writing makes for specificity and clarity, reduces the chances for errors, and allows for constant reference as to what was agreed upon, it nevertheless holds no superior position over an oral compact in the realm of authoritative utterances, except where the Statute of Frauds intervenes or is invoked. The most ironclad written contract can always be cut into by the acetylene torch of parol modification supported by adequate proof."³⁶⁴

1. Mutual Assent to an Unsigned Written Settlement Agreement

Written settlement agreements can become effective before any party actually provides a signature. The general rule is that an agreement becomes binding upon mutual assent of the parties even in the absence of a signature.³⁶⁵ This general rule can get parties into trouble because they may breach their agreements by refusing to perform their obligations under the erroneous assumption that they have no duties under the agreement until they actually sign. After a fleeting moment of agreement on all terms of the settlement, parties may resume their conflict—this time over their duties under the agreement.

Case law is replete with instances in which one party denies the existence of an agreement for lack of a signature only to be held to be in breach of the agreement. The First Circuit's decision in Kinan v. Cohen provides a cautionary tale.³⁶⁶ The plaintiff, Kinan, insisted there be no settlement until he approved "the precise language of the agreement" and had executed a written document. Kinan's attorney informed opposing counsel that "there is no 'deal'" until Kinan gave approval to the exact language of the agreement. The First Circuit held that minor differences over language for terms of a settlement did not prevent the mutual assent of the parties from creating a valid agreement.³⁶⁷ Even in California, where all parties must personally sign an agreement to secure that state's expedient statutory enforcement procedure, there is no requirement that all parties personally sign the settlement agreement to make it valid.³⁶⁸

The implication is that attorneys and parties must be careful to refrain from prematurely creating a valid settlement agreement The best practice is to have the parties sign the written agreement as soon as possible after the drafting is completed. Prior versions and marked-up copies should be promptly destroyed. Moreover, discussions during the drafting process—especially if prolonged, complex, or involving multiple parties—should be accompanied by express disclaimers of any agreement until a final written agreement has been executed by having all parties personally sign. Even when the contours of the proposed agreement are acceptable to a client, an attorney should avoid responding that "we agree" or similar reply that can be construed as a tacit response. Perhaps counsel might consider including a disclaimer with negotiation communications such as:

This

...