In the construction arena, there is a constant dialogue between owners, builders, and designers about changes to original deal terms. It’s natural and expected. And sometimes those dialogues lead to disagreements, and sometimes to litigation. Once in litigation, the dialogue to resolution will hopefully continue, but be careful how that dialogue is framed, because a party might find themselves bound to a deal they didn’t intend to make.
In June 2022, the Utah Court of Appeals upheld the district court’s enforcement of an oral settlement agreement between the parties which agreed to a “walk-away” offer which was memorialized by attorneys’ emails, despite subsequent disagreements on terms, and compelled the parties to sign a written settlement agreement that the Court found contained the material terms of the parties’ agreement. Although this is not strictly a “construction” case, the decision in Park Property serves as a reminder to be careful of settlement communications and be cognizant of the material, and potentially non-material, terms before agreeing to a settlement offer.
In Park Property Management LLC v. G6 Hospitality Franchising LLC, Park Property filed a lawsuit against G6 Hospitality for claims arising out of a terminated franchise agreement (the “Franchise Agreement”), including a claim that the Franchise Agreement was void and should be rescinded. After mediation, G6 Hospitality offered Park Property a “walk-away” settlement. Counsel for Park Property orally agreed, and memorialized the agreement in an email dated November 20, stating that the email “communication confirms our conversation today in which I conveyed my clients’ acceptance of G6 Hospitality’s offer to settle by each party ‘walking away’. We have agreed to settle by each party agreeing to release the other for claims that were or could have been asserted….” G6 Hospitality followed with a confirmation email, stating that the email confirmed Park Property’s acceptance and that G6 Hospitality’s counsel would “prepare a settlement agreement containing a broad general release….”
Subsequent to the oral agreement confirmed by an email, the parties wrangled over the addition and deletion of additional terms to the agreement, agreeing to some and disagreeing as to others. On January 26, 2020, G6 Hospitality sent a final version of the settlement agreement (“January 26 Agreement”) with indemnification, insurance, post-termination, and confidentiality provisions, even though G6 Hospitality had agreed to remove the post-termination and confidentiality provisions. Park Property refused to sign, and G6 Hospitality filed a motion to enforce the settlement.
Although Park Property argued that the agreement on November 20 was merely an agreement to enter into a future settlement agreement, and was not enforceable, the district court determined that the November 20 acceptance represented a binding settlement agreement because the language used was definite as to the material terms, i.e., the walk-away agreement and the agreement that each party pay their own costs. G6 Hospitality then moved the court to compel the parties to sign the January 26 Agreement because the parties had orally and by email agreed to other material terms therein. The court agreed and ordered the parties to sign the January 26 Agreement.
On appeal, the court of appeals examined 1) whether the November 20 acceptance was enforceable, and 2) whether the court erred by enforcing the January 26 Agreement. First, the court found that the “walk-away” offer on November 20 contained terms that constituted the integral features of the settlement agreement, and they were “sufficiently definite as to be capable of being enforced.” The court disagreed with Park Properties’ argument that the parties’ agreement to put the settlement in writing manifested intent to defer legal obligations until a writing was made. The court found that the parties definitively agreed in the November 20 email to walk away from all claims and to pay their respective fees and costs. Those terms were unambiguous and plainly applied to each party. The court also found that counsels’ subsequent oral and email communications demonstrated the parties’ meeting of the minds on the additional terms, such as the enforceability of the Franchise Agreement and the inclusion of the indemnification provision. Second, the court agreed with the district court’s order to compel the parties to sign the January 26 Agreement because that document accurately represented the parties’ agreement as to both the material terms that were agreed to on November 20 and the subsequent terms that were agreed to orally and by email communication thereafter.
