“Deal or No Deal?”

October 30, 2013 2:59 pm - Categorised in: , ,

A recent decision of the High Court is a salutary reminder to parties involved in any form of settlement negotiation  that failure to make a settlement offer expressly ‘subject to contract’ may produce unintended consequences.

In Newbury v Sun Microsystems [2013] EWHC 2180 (QB), the Defendant  employer’s solicitors wrote to the Claimant employee’s solicitors making a financial offer in early settlement of an Employment Tribunal Claim, on the express basis that the settlement was, “to be recorded in a suitably worded agreement”. The employee’s solicitors accepted the offer later that day by email. The High Court held that despite the employer’s express statement that the settlement terms were to be reduced to writing, the settlement was, as a matter of law, binding on both parties immediately upon communication of acceptance by the employee’s solicitors. The employer could not therefore compel the employee to enter into a ‘suitably worded agreement’  in which it would have been the employer’s intention to seek to include further settlement terms, including express confidentiality provisions. The ‘deal’ had already been concluded.

In light of the decision in Newbury, any party making an offer in the course of settlement negotiations must be sure to use the words ‘Subject to contract’ if it does not wish to be bound by its offer until a written agreement – in which it may seek to incorporate further settlement terms – has been executed. Failure to do so will leave that party at risk of being bound by an offer which did not necessarily reflect all of the terms it wished to impose.  

If you require advice or assistance please contact Tim Jones at our Long Eaton office on 0115 972 5222 or email t.jones@ellis-fermor.co.uk

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