Can settlement negotiations be binding?

Settlement is an integral aspect of most litigation.  The majority of court claims commenced in Ontario are settled by the parties at some point.

When negotiating a settlement agreement with another party, be very careful what you say.  Parties can be unpleasantly surprised when what they thought were simply part of ongoing negotiations have been found by the courts to be a binding component of a concluded settlement agreement.

Situations in which negotiations can be elevated to the level of a concluded settlement agreement include when the parties are negotiating by correspondence, email, or telephone, or where there is no single document which defines all of the terms of the alleged settlement.  In these situations, the courts will look at all of the documents and evidence of negotiations to determine whether the parties have reached consensus.

The end result is that you could be locked into a binding agreement which was not your intended bargain or final outcome, and may not be in your best interests.  This is true even if you have not executed settlement documentation.

In Olivieri v. Sherman (2007 ONCA 491), the Ontario Court of Appeal found that in order to determine whether a binding contract exists, the court must consider whether the words and action actions of the parties show that they had a mutual intention to create a legally binding contract, and reached an agreement on all of the essential terms.

You can protect yourself in these situations.  Retaining a lawyer can ensure your interests are protected, that negotiations remain non-binding, and that concluded settlements are representative of your interests and intentions.  If you don’t have a lawyer, it is recommended that you ensure both parties work from one master settlement document during discussions and that any amendments in the context of negotiations are clearly identified as such (including marking them “without prejudice” as required).   Restrict any statements, either verbally or in writing, outside of the master document to ensure that they are not inadvertently relied upon by the other party.

The commercial litigators at Brown Litigation tenaciously represent the interests of our litigation clients, and can assist you with negotiating resolutions of all manner of disputes.

Posted by D. Jared Brown – Lead Counsel Continue reading