The Maine Supreme Judicial Court recently held that two attorneys verbally entered a binding settlement agreement during a deposition in a probate matter, even though no formal written agreement was ever signed or agreed to. This case highlights the importance of using clear language during negotiations that no agreement is final until a formal, written agreement is executed.
In Estate of Harold Forest Snow, the attorneys dictated to the court reporter what was referred to as an “outline” of a settlement reached during a deposition, with the specific language to be worked out later. In the weeks that followed, the attorneys circulated drafts of proposed language, but could not agree upon the formal settlement documents. One of the parties filed a motion to enforce the settlement agreement as stated during the deposition. The Court concluded that terms stated in the verbal “outline” were enforceable in their own right, even without a signed agreement. In its analysis, the Court emphasized that the attorneys’ discussion reflected a current intent to be bound by the terms stated, not an intent to be bound only by a formal written agreement to be drafted at a later time.
As a practical matter, the area where this decision could prove problematic is e-mail. E-mail is frequently utilized as a quick, efficient means of communication. In light of this new case, one can see the risk that informal e-mail discussions can manifest into a situation where one party might argue an “agreement” has been reached. Similarly, a party may unknowingly enter into an amendment of an existing agreement without executing any formal amendment documents. To minimize this risk, a party should always use clear, unambiguous, language during any negotiation that the party does not intend to be bound except by a formal written agreement that is signed by hand.