Verjee Law: Deal Or No Deal – Keys To Enforcing A Settlement Agreement

In the course of litigation, parties can often find themselves in a disagreement as to whether a settlement was reached between them. This may occur in circumstances in which a settlement is negotiated between the parties, only to have one of the parties soon after change their mind or express “buyer’s remorse”. 

The Court has confirmed that parties may enforce on a settlement even before they execute and complete the formal settlement documentation. A binding settlement agreement can be formed through verbal and written discussions between the parties or their counsel. 

This approach is consistent with the principle of contract law that agreements, whether relating to settlements or otherwise, may be enforceable even if the parties do not reduce their agreements to writing.

The essential question the Court analyzes to determine if a settlement agreement has been reached is whether the parties have reached a mutual agreement on all essential terms.[1]

The Court, when interpreting the settlement, will look to the background and context that led to the formation of such agreement. This may include a review of the discussions between the parties, or their counsel, to determine the circumstances and intentions of the parties. The Court has confirmed the following principles with respect to settlement agreements:

• Neither “buyer’s remorse”, or a party’s belief after the fact, that the settlement was improvident, will allow a party to back out of a settlement agreement if an agreement had been reached and is enforceable.[2]

• A settlement agreement may be enforced even if there remain unsettled details. This may include scenarios in which there remains documentation to be prepared, or if certain steps are to be taken to execute the agreement, provided that the unsettled details do not go to the heart of the matter and that the uncompleted documents or steps are merely matters of carrying out the terms of the existing settlement agreement.[3]

Although, this issue is fact specific, a settlement agreement is formed once the parties are agreed on the essential terms. These agreements, as with other contracts, have a legal effect and a change of heart is not grounds to avoid or evade a contract. The civil justice system is aimed at settling disputes and the Court will not allow parties to easily slip out of agreements to settle.

[1] Buterman v Greater St. Albert Roman Catholic Separate School District No. 734, 2017 ABCA 196.

[2] Radhakrishnan v University of Calgary, 2002 ABCA 182.

[3] Klemke Mining Corporation v Shell Canada Ltd. et al., 2008 ABCA 257. See also Diegel v Diegel, 2008 ABCA 389.