Three Little Words: "Subject to Contract"

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The recent decision in Newbury v Sun Microsystems [2013] EWHC 2180 (QB) highlighted the issues in ensuring that draft settlement agreements do not bind the parties until the agreements are in final form. In Newbury, a letter from the defendant’s solicitors to the claimant’s solicitors setting out the terms of a proposed settlement, coupled with a responsive acceptance email from the claimant’s solicitors (even though marked “without prejudice save as to costs”), were held to constitute a legally binding settlement agreement.

The High Court reached its decision for several reasons:

- the defendant’s solicitors' letter was expressed as an offer of settlement, set out the terms of such offer and stated that the offer was open for acceptance for a specified time. This was a clear indication that the letter was therefore intended to be a binding offer capable of acceptance with certain legal consequences following from acceptance...

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Topics:  Contract Formation, Settlement, UK

Published In: General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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