Dispute settled by phone – a case of unintended consequences.
The recent case of Thameside Construction v Arthenella Ltd provides a stark reminder of the legal effect (and the inherent risks) of conducting verbal negotiations – a party may end up unwittingly snatching an agreement from the jaws of a dispute.
Most parties to a dispute expect that the terms on which the matter is settled will be reduced to writing. Indeed it is almost universally desirable for this to be the case. A written settlement agreement, (drafted, we suggest, by a good lawyer) will clearly set out the terms on which each party walks away from the dispute and, importantly, ensure that the terms of the settlement agreement and clear, and do not themselves become the subject of further litigation.
By contrast to a written agreement that sets everything out in black and white, verbal agreements generally carry a greater risk for shades of grey to appear in the mix. In other words, a parties’ true intentions stand a greater risk of being misinterpreted, as the managing director of Arthenella found out. The same, of course, is true for any agreement.
In this case, each party put a written settlement offer to the other.
The managing directors of each party exchanged a few emails and had a number of telephone conversations with each other about their respective offers. The upshot of these discussions was that the MD of Thameside thought that a binding settlement had been agreed upon. The Arthenella MD did not.
The matter reached court. It was held that the telephone conversations had brought about an oral agreement that was every bit as binding on the parties as if it had been written down. Needless to say, the terms were not as favourable from Arthenella’s perspective as they would have liked them to have been.
Although decided on its facts, the case warns lawyers (and their clients) that the court will give effect to a client’s settlement of a dispute. The backing of a good dispute resolution team can help to ensure that, when and if a dispute is settled out of court, it is done on terms that are favourable, and exactly when the party wishes to settle, rather than beforehand.
For more information on how our dispute resolution team can assist you, please contact Quentin Bargate or Andrew Denny of Bargate Murray.