April 25, 2011
Full Disclosure --
our firm represents the appellants in the case discussed below.
In February, we blogged about an Indiana Court of Appeals decision that held that
an email exchange between attorneys was sufficient to constitute a binding settlement agreement. Today, the Indiana Court of Appeals made an important caveat in
Zukerman v. Montgomery, ___ N.E.2d ___ (Ind. Ct. App. 2011), Cause. No. 49A02-1006-CC-803 - this rule only applies when the material and essential terms of the settlement agreement are reasonably definite and certain, so that we can know what the parties intended.
less..
This case involved a complex set of litigation arising from multiple real estate transactions. The parties were business partners and had invested in a number of real estate parties, with different corporate entities owning different properties. Eventually, there was a falling out and a series of lawsuits and an arbitration proceeding arose over who owed whom money. In November 2008, the principal individuals involved in these disputes mediated the matter and entered into a settlement agreement. Issues then arose over the terms of the settlement agreement and one party moved to enforce that agreement. All of the various lawsuits were consolidated together and, after a hearing, the trial court entered an order enforcing the settlement agreement.
On appeal, the Court found that the settlement agreement was not reasonably certain in the terms and conditions of the promises made, including by whom and to whom. The Court then went on to describe multiple ways in which the settlement agreement could be interpreted.
We will not attempt to determine which, if any, of these interpretations may have been intended by the parties to the Settlement Agreement. As previously stated, we cannot make a contract for the parties and we are not at liberty to supply omitted terms while professing to construe a contract. Further, there is considerable ambiguity with respect to the debts to be paid by the parties, and the Settlement Agreement does not contain any ascertainable formula or standard for determining the extent of each party's obligations to relinquish shares or property interests free and clear of encumbrances. We also observe that a "contract must provide a basis for determining the existence of a breach and for giving an appropriate remedy," and we cannot ascertain with any degree of confidence based upon the language of the Settlement Agreement what actions or omissions by the parties may constitute a breach of the terms of the Settlement Agreement or the remedy a court could order to make the non-breaching party or parties whole in the event of any breach.
Because the settlement agreement lacked this information, it was too vague to be enforceable against the parties.
The Court's discussion does not describe what kind of testimony was presented to the trial court, so we can't know whether the testimony presented would have filled in the blanks missing from the settlement agreement or simply demonstrated a lack of the meeting of the minds. However, counsel should take this case as a warning to be careful when drafting the terms of a settlement agreement. Write the agreement in such a way as to eliminate ambiguity, so that all parties know all of the essential terms of the agreement. If you do not, then you may just be inviting additional, unnecessary litigation.
Lessons:
- A settlement agreement is unenforceable if you cannot ascertain its essential terms with reasonable certainty.
- A settlement agreement is unenforceable if a party cannot ascertain what conduct would constitute a breach of that agreement.
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