A settlement achieved at an early stage in the life of a dispute saves on the time and expense involved in commencing and pursuing court action to a contested hearing. But a settlement at any time before judgment is handed down by a court ensures the parties retain some control over the outcome.
However, the sense of relief a party should experience when a dispute is settled can sometimes be brief if their understanding of what the deal means is different to that held by the other party. If the terms have not been thought through fully and articulated clearly then the parties may find themselves back at loggerheads.
So what can parties do in advance to ensure that the deal they intend to strike actually achieves the settlement they desire?
Each dispute has its own unique set of circumstances. Before negotiations start it is usually important that the parties state that settlement discussions are to be held on a ‘without prejudice’ basis. Without prejudice means that the discussions cannot be revealed to the court at any point before judgment. A discussion of possible terms of settlement will often involve some element of concession for the sake of promoting a constructive dialogue. Being able to do this on a without prejudice basis allows negotiators to take compromise positions which they might not be comfortable to do if there was a possibility of unsuccessful or incomplete negotiations being presented subsequently to a court to suggest a lack of conviction in their case.
If negotiations are conducted in writing it is usually advisable that each item of correspondence is headed ‘without prejudice’. If a without prejudice letter or email contains some but not all of the terms of settlement then it is advisable also to mark it ‘subject to contract’. This means that a binding, concluded agreement will not come into being until the terms of settlement are recorded in a written document and signed by all parties.
As with any contract, a settlement agreement should provide certainty so that the parties know precisely what rights and obligations they have agreed to. The parties will know the factual context, but sometimes the careless use of language – or the intentional use of specific phrases with legal effects which may not be fully understood – can leave the parties in a position which is different to what they thought they were committing to. Taking legal advice before finalising settlement terms can be a very wise investment. The expenditure will look like very good value for money compared to the costs of being tied in to a contract with unforeseen obligations, less-than-expected entitlements, and the possibility of having to re-litigate the whole dispute.
If you need guidance in negotiating, or in recording terms of settlement, then please contact our Dispute Management Department.
If you would like further information or would like to discuss this article further, please contact Michael Buchanan.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.