The risks of imprecise wording in settlement agreements

Wording in settlement agreements: Solicitor Emma Napper explains why it is so important that correct and precise wording is used in a settlement agreement

In a case in the Technology and Construction Court of the High Court (Jacobs UK Ltd v Skidmore Owings & Merrill LLP) the court had to consider the meaning of a settlement agreement that had been reached between the parties that settled their earlier litigation.

There is a warning to all who enter into Settlement Agreements, whether they be, as in this case, commercially based litigation or the more humble employment settlement agreement, of the imperative need to ensure that the terms of any such agreements are clear and comprehensive. If the wording of the Settlement Agreement is imprecise or unclear there is a real risk of the agreement causing further disputes and even litigation in the future.

The facts of the case are not of major interest for this article, save to say that the argument revolved around whether the agreement to “award” a certain number of hours of work could be satisfied by “offering” the work, even if the offer was not taken up.

The court concluded that the “award” of a contract could not be equated to the mere “offer” of a contract. Unless contracts had actually been entered into by the parties, the claimant was entitled to claim its loss.

The judge pointed out that more specific and precise wording of the Settlement Agreement, which could have directly addressed the need for concluded contracts to be entered into, would have left no room for argument. A failure to be precise in the wording of the Settlement Agreement is likely to mean that, while both sides may be on reasonably friendly terms at the time of entering into the settlement, at a later date, litigation could well be the (expensive) result.

If you are an employee and have been offered a Settlement Agreement then our fees for advising on the terms of the compromise will generally be paid by the employer.

For further guidance on the risks of imprecise wording in settlement agreements or for a free assessment of your case, contact us at [email protected] or give us a ring on 0808 139 1589