Settlement Agreements – Get Them in Writing
Sarah Johnson, Esq.
It’s often beneficial for the parties of a dispute to consider an early resolution via compromise. Settlements can offer a mechanism for a cost-efficient resolution, the preservation of business relationships, and peace of mind. Accordingly, it’s not unusual for design professionals to pursue settlements prior to litigation or even during litigation.
Design professionals may believe that a so-called ‘handshake,’ or a verbal settlement agreement, is a simple and easy way to resolve disputes. In a perfect world, both sides to a dispute would always honor the commitments made in these ‘handshake’ agreements. But such is not always the case, and the design professional will likely find that verbal settlement agreements are difficult or (in some circumstances) impossible to enforce when the other party refuses to honor what they agreed to.
Although verbal settlement agreements are typically subject to the law of contracts and thus enforceable to the same extent that a verbal contract is enforceable, proving the terms of a settlement agreement when there is conflicting testimony can be difficult.1 In order to show that an enforceable settlement agreement exists, the party seeking to enforce it must show an offer, acceptance, and meeting of the minds as to the essential terms of the agreement.2
In disputes over the enforcement of a settlement agreement, the party’s opposing enforcement frequently challenges the aforementioned acceptance and meeting of the minds. It is the burden of the party seeking to enforce the settlement agreement to show that the opposing party agreed to every essential term of the settlement.3 Given that the burden is on the party seeking to enforce the agreement, courts will often refuse to enforce the settlement agreement in the face of conflicting testimony and the absence of any writing.4
Indeed, in Georgia, an oral settlement agreement is enforceable only if its existence is undisputed.5 In other words, if the existence of a settlement agreement is disputed, it may only be established by writing under Georgia law. Additionally, there are certain instances where the courts of various jurisdictions have mandated that a settlement agreement be in writing to be enforceable from the beginning.6
While the impulse to compromise and obtain a settlement is laudable, it’s important to proceed in a careful and organized manner with the goal of obtaining a written, enforceable settlement agreement. If the design professional believes that a settlement agreement is an advantageous way to resolve a dispute, they should still notify their professional liability carrier prior to negotiating the settlement. This will help to ensure they’re not jeopardizing their insurance coverage by admitting liability or settling a claim without the insurance company’s knowledge or consent.
Additionally, the insurer can assist the design professional in drafting and obtaining a written settlement agreement, ensuring that the dispute is fully and finally resolved. In some instances, the claimant need not even know of the insurance company’s involvement, as the insurer may be able to simply provide the design professional with the necessary settlement documentation.
1Williams v. Ingram, 605 So.2d 890, 893 (Fla. Dist. Ct. App. 1992) (“Settlement agreements are to be interpreted and governed by the law of contracts.”); County Line Nurseries & Landscaping, Inc. v. Glencoe Park Dist., 46 N.E.3d 925, 932 (Ill. App. Ct. 2015) (finding that settlement agreements are governed by the principals of contract law); see also Sementa v. Tylman, 595 N.E.2d 688, 691 (Ill. App. Ct. 1992) (finding that the law of contracts is applicable to settlement agreements).
2County Line Nurseries, 46 N.E.3d at 932; Sementa, 595 N.E.2d at 691.
3Williams, 605 So.2d at 893.
4See Walz v. Walz, 652 So.2d 929, 930-31 (Fla. Dist. Ct. App. 1995) (finding no meeting of the minds as to essential terms and thus no enforceable settlement agreement where one party to a divorce responded “okay, okay” to certain requests, but the parties walked away with a written agreement only as to household and personal items); Metro. Dade County v. Estate of Hernandez, 591 So.2d 1124, 1124-25 (Fla. Dist. Ct. App. 1992) (finding that there was no enforceable contract in a case where there was conflicting testimony as to whether the $10,000 offer was accepted).
5Walker v. Lewis, 600 S.E.2d 773, 774 (Ga. Ct. App. 2004).
6See Cal. Civ. Proc. Code § 664.6 (Deering 2023) (“If parties to pending litigation stipulate, in a writing signed by the parties outside of the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement.”); see also Meyer v. Lipe, 14 S.W.3d 117, 119-21 (Mo. Ct. App. 2000) (finding that the statute of frauds prohibits the enforcement of an oral settlement agreement involving the transfer of land).
