#16048 - Reaching A Settlement - BPC Alternative Dispute Resolution

Reaching a settlement (final stages of negotiation or mediation)

• For 3 reasons, things can go wrong at this stage:

  • (1) parties and lawyers likely to be tired

  • (2) those involved may have focused on particular issues and forgot other points requiring agreement

  • (3) may not be clear when a negotiation process comes to an end (if there is an ongoing exchange of communications or overlapping offers, or when a mediation finishes (if a case does not settle on the day and the mediator retains some involvement.

Contractual Principles

• A settlement is essentially a contract, and thus is based on contractual principles.

  • A settlement will be reached and binding as soon as the requirements for a valid contract are met.

  • ICLR can be shown easily where there is a desire to settle.

  • Consideration can be shown easily where there is a compromise involved

  • Offer & acceptance can arise in many ways, not necessarily any formalities

  • Terms need to be sufficiently clear, but they may be clear and binding without necessarily being the terms a party intends.

  • If one party lacks capacity (eg child) any settlement reached is conditional on court approval

  • If one party is a public body or company, settlement may need to be approved by a committee before being binding.

• A potential settlement may not be binding, or may be challenged, on contractual grounds:

  • Parties may specify that they only intend to create legal relations, and thus be bound by settlement, in certain circumstances, eg when the terms of a consent order are agreed.

  • A party may be able to issue proceedings to set aside a settlement agreement, or defend enforcement proceedings brought in respect of such an agreement, if the contract is vitiated by fraud or misrep.

Oral agreement and email

• A binding settlement from negotiation or mediation can be reached in relatively informal ways, including orally or exchange of emails.

• Provided the terms are sufficient clearly an agreement could be binding, even if precise wording of a consent order not yet finalised.

• If an exchange takes place over a period of time, some terms may be agreed before an overall agreement is finalized, and care may be needed to ensure that points made orally in early stages are not potentially binding representations.

• So crucial to ensure process and terms are absolutely clear.

• If intended that the oral agreement is subject to some condition (eg client approval), or not be binding until reduced to writing and signed, this needs to be clearly agreed in advance.

Responsibilities of the lawyer

• In either negotiation or mediation, role of lawyer is likely to involve:

  • Advising client in advance of a settlement process as to what terms of settlement may be appropriate, and getting instructions.

  • Ensuring the settlement process being followed is set up clearly and remains clear;

  • Advising the client what terms of settlement to offer, and whether to accept an offer made;

  • Ensuring the circumstances in which terms will be complete and will become binding are clear to both parties.

checking coverage and detail

• Can be v difficult to rectify the terms of an order once they have been negotiation & agreed

• When provisional terms of agreement are reached, the lawyer should:

  • Double-check his/her list of issues to ensure every item is resolved;

  • Go through agreement on each issue to ensure both sides agree exactly what has been agreed.

  • Check that details such as dates for actions to be completed are included;

  • If there are still actions to be taken to complete the agreement, eg an item to be value, agree how and when that will happen

  • Ensure all the details relating to figures have been included, eg any interest payable, date of payment, interest or other penalty for late payment etc. If instalment payments have been agreed should be absolute certainty re time, date, method for each payment

  • Ensure the settlement agreement deals with any payment re costs or the parties will pay their own. Eg costs to date of either party; costs of litigation to date if proceedings have been issued; costs of the negotiation/mediation process itself. Often mediation agreements provide that the fees and expenses of the mediation should be borne jointly by the parties, and that each party is responsible for their own legal costs.

  • Consider whether one party is acting under a CFA/DBA agreement or has 3^rd party finance

  • Double check all arithmetic

  • Agree wording if an apology is to be provided

  • If one of the settlement terms if that the parties will enter into a new contract, eg ongoing commercial relationship, the form and terms of that contract should be agreed

  • Check each term is practical and realistic

  • Give thought to methods of enforcement if a breach of the terms of the settlement by any party.

  • Consider making provision for how any disputes arising out of the terms be dealt with

  • If litigation has already commenced, decide and agree the means by which the litigation will come to an end. Usually done by:

    • lodging a consent order;

    • staying the action on the terms of the settlement (Tomlin order);

    • by C applying for dismissal of proceedings;

    • or by a consent order made in the proceedings that sets out the terms agreed

  • Check the agreement on crucial issues, and overall, is within instructions and reasonably meets the client’s objectives. Test is whether the deal as is close to your client’s instructions and objectives as realistically possible.

  • Check client understands the agreement and accepts it.

• The checking process must be done carefully; potential agreements can fall apart at this stage

• If a lawyer acts unreasonably in refusing to agree the terms of an order being drawn up following directions from a judge the lawyer may be liable for costs incurred.

• In mediation, mediator should assist in ensuring a provisional agreement is not undermined by unreasonable tactics:

  • Renegotiation of an issue: one side may claim the agreement on an issue is not as good as it might be, and will try to renegotiate. Could respond by saying the terms are an oral agreement and cannot now be varied.

  • Adding an issue: may be a tactic to change balance of whole deal

  • Filling a gap: something introduced as minor to fill a gap might actually be an additional issue or renegotiation.

  • Points of details: getting detail right can be used tactically as a mask for renegotiation.

  • Confusion: confuse may emerge if parties did not in face agree a point they thought had been agreed.

Recording the outcome

• Vital to record the terms agreed in writing at end of the negotiation/mediation. Very risky to leave the outcome as an oral contract.

• Very simple terms may be recorded on paper; but increasingly common to use a laptop. Can be pre-loaded with possible draft settlement terms and precedents for settlement agreements and orders.

• In negotiation:

  • Is normal for one or both lawyers to make a note of terms agreed as the negotiation progresses.

  • At end, compare notes and agree wording of the terms. As a fresh document or word processing.

  • Should be agreed what should happen to the note of the terms (eg, might be given to an instructing solicitor to be used as basis for an exchange of letters, or basis for reporting to a judge the terms agreed

  • A separate copy may be needed for a judge, if terms of agreement are to be taken immediately into court for endorsement in an order.

• In a mediation:

  • Mediator will normally lead the process of recording the terms agreed, and insist the parties sign the terms before they leave.

  • Likely to be based on notes the M has taken.

  • Some mediation service providers use a pro forma for recording terms of settlement.

  • If parties are represented, likely to ask lawyers to draft the settlement.

  • If lawyers are not present: ‘heads of agreement’ may be signed, and then referred to lawyers for the drafting of a formal settlement or court order.

  • Alternatively, M may draft an agreement, but tell the parties the terms will only be binding once the parties have sought legal advice, giving a set period for this to be done.

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