News & Noteworthy



Authored - NJ Contract Law Update - Settlement Agreements Don't Spell Everything Out
NOVEMBER 15, 2012 | Commercial Litigation

Kuo v. Kuo, 2012 WL 4052035 (N.J.App.Div. Sept. 17, 2012), is symptomatic of many settlement agreements: the essence of a deal may be expressly agreed to, and it may be clear that both parties think the matter is settled, but enough terms are left out (or enough 'fight' is still left in the parties) that there is then a dispute about the settlement itself.

Settlement agreements are contracts like any other, and may arise out of any sort of dispute, not necessarily an underlying 'contracts' dispute. Settlement contracts are somewhat unique procedurally; in that no matter how complex the dispute, and no matter how complex the terms of the settlement, all of that may be negotiated in a very compressed time-frame; so that unlike other agreements that complex, many terms may not be explicitly spelled out.

Kuo was a family dispute regarding certain real estate. As the Court explained:

[A]fter approximately twenty trial days, counsel advised the judge of a settlement. There followed--spread over eighty single-spaced transcript pages--a description of the parties' understanding settling the dispute... [T]he parties acknowledged under oath that the attorneys' verbal description represented their agreement...[and consented] to be bound *** Unfortunately but, perhaps, not surprisingly considering the parties' disputatiousness...cross-motions were filed relating to disputes that had subsequently arisen about the parties' obligations under the settlement agreement.

***

[The settlement was then enforced by the trial court.]

***

Defendants appealed, arguing that the ... proceedings did not result in a binding settlement agreement because, in their words, "the negotiation did not result in a meeting of the minds as to the essential terms."

The Appellate Division found that the settlement agreement was indeed enforceable. In fact (as noted), the deal was unusually detailed and 'documented' (in the sense of a transcript). "[T]hat defendants may have located ambiguities or omissions regarding ... inessential aspects of their agreement...does not render the agreement unenforceable... The existence of any such ambiguities or open questions do [sic] not demonstrate...the absence of a binding agreement..."

The morals of the story are these:

  1. "An agreement to settle a lawsuit is a contract...like all other contracts."
  2. The law favors enforcement of settlements; so expect close questions to be decided accordingly.
  3. As the Kuo Court implicitly recognized, and other authorities known to this author state, a court is empowered to imply additional; commercially reasonable terms to complete any settlement that is so clearly intended to be binding.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.




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