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When parties participate in settlement negotiations, they may agree even if they do not produce a formal contract. The parties may indicate consensus on the essential terms in various ways, such as through an email acceptance, or their behaviour may indicate they believed themselves to be bound by its terms. These can constitute acceptance and form a binding settlement. If one party later alleges that no agreement was reached, the other may take steps to have a court enforce the settlement.
Court Looks at Three Elements to Assess if Parties Reached a Settlement
In Grant v. Kirlew, the parties attended a mediation dealing with support and property issues. Following the mediation, the mediator emailed the parties and summarized the tentative terms that had been reached. A series of emails was exchanged, and several edits were proposed and discussed. Three versions of Minutes of Settlement were exchanged, but the parties could not reach an agreement on the specific terms to be included. The applicant then brought a motion seeking an order in line with the settlement terms negotiated by the parties, which were set out in a memorandum of understanding that the mediator had prepared. The question was whether the parties had reached a binding and enforceable settlement. The applicant argued that the email exchanges between the parties and the mediator demonstrated that an agreement had been reached.
The judge looked to Fernicola v. Fernicola. That case explained that three separate lines of inquiry need to be considered when assessing whether the parties have reached a settlement:
- Was there a “meeting of the minds” or consensus ad idem that was manifest to the reasonable observer?
- Was there a consensus on all of the essential terms of the agreement?
- Did the parties make the agreement conditional upon any other term, or subject to execution or a formal contract?
In that case the judge also explained that this is an objective test, and the parties can be found to have reached a meeting of the minds “where it is clear to the objective reasonable bystander in light of all the material facts that the parties intended to contract and the essential terms of that contract can be determined with a reasonable degree of certainty”. As courts have made clear, each case will be fact-driven and based on an assessment of the parties’ objective intentions.
Parties’ Conduct Can Indicate if an Agreement was Binding
Courts can examine the parties’ conduct, indicating whether a contract was binding. For instance, in Bawitko Investments Ltd. v. Kernels Popcorn Ltd, the court determined that an oral agreement was not binding because the parties’ conduct suggested they were not in consensus on all the terms. Additionally, in Andrews v. Lundrigan, the court looked at the parties’ conduct as a means of discerning their intention, noting that parties may act as though they have an agreement and are bound by its terms. And in Ward v. Ward, the judge found that the parties performed their obligations as if they had a binding agreement, and noted that no concerns or second thoughts were expressed and that the parties did not believe that other terms remained to be negotiated. In Bawitko, the Ontario Court of Appeal held that an agreement is binding at common law if the parties consider that it contains all the essential terms. The court warned that a contract will be incomplete if “essential provisions intended to govern the contractual relationship have not been settled or agreed upon”. Additionally, the contract may be too general or uncertain to be valid.
Regarding the third element, it is necessary to distinguish between an actual agreement reached by the parties and a mere agreement to agree. This scenario was also addressed in Bawitko, where the court stated that an agreement to later agree on essential terms is not final or binding. Similarly, the parties might defer their legal obligations until they execute a formal contract. There may not be any uncertainty surrounding the terms, but Bawitko is clear that on this basis, any “preliminary agreement cannot constitute an enforceable contract”.
A Binding Agreement Must Contain All of the Essential Terms
In Grant, the judge ran through the three elements to determine if the parties reached a settlement. Justice Holowka found that the email exchanges between the parties’ counsel demonstrated a meeting of the minds and that emails from both lawyers reflected that they agreed. Additionally, the parties’ conduct indicated that an agreement had been reached. The respondent proceeded to pay child and spousal support following the negotiated settlement. The respondent’s counsel also emailed the applicant’s counsel and confirmed that the parties had settled the financial issues and would not proceed with a scheduled motion before the court. Finally, the respondent filed a case conference brief that stated that spousal support, child support, and equalization of net family property had been settled. The respondent alleged that the applicant failed to fulfill her obligations as a basis for claiming that no agreement was reached. He specifically claimed that the applicant refused to provide a receipt for $100,000 of spousal support, which led to him filing income taxes late and incurring a penalty. However, the judge did not attach significant weight to the argument and did not think it was determinative of whether an agreement was reached.
The judge then turned to the second element and considered whether there was consensus regarding the essential terms of the agreement. The respondent alleged that there was only an agreement in principle on some, but not all of the crucial terms, and that the terms would be refined through additional discussions. In support of this, he pointed out that the term “reasonable post-secondary expenses” was not defined and was necessary to avoid ambiguity and uncertainty. In N.C. v. M.D., the court looked at the law surrounding settlement. It concluded that for an agreement to be binding, “it is not necessary that the agreement include all of the ancillary terms already implicit in its content”. But in this instance, Justice Holowka determined that the agreement contained all the essential terms and was not just an agreement to later agree on terms. The definition of “reasonable post-secondary expenses” was not needed for the agreement to be complete.
As the judge pointed out, section 7 of the Child Support Guidelines provides tests for determining the necessity and reasonableness of an expense if the parties cannot agree. The term’s meaning could be resolved by “resorting to the usual family law processes.” Overall, the emails between the parties and their post-mediation conduct established agreement on the essential terms. As Bawitko made clear, the lack of formally signed minutes of settlement did not change the binding nature of their agreement.
Section 55(1) of the Family Law Act states that a domestic contract is unenforceable unless made in writing, signed by the parties, and witnessed. However, courts can enforce settlements that do not meet those requirements. In Gorman v. Gorman, it was made clear “the Court’s jurisdiction to enforce agreements made by parties is not limited to situations that strictly comply” with that section of the Act. In Grant, the judge accepted that this was an appropriate case to enforce the agreement even though it did not meet the formal requirements in the Act. The applicant’s motion was granted, and a final order by the settlement terms was issued.
Judge Grants Final Order According to the Settlement Terms
An agreement on essential terms later will not constitute a final and binding agreement. However, the parties don’t have to reduce the terms into a final and executed contract. This case demonstrates the clarity and consensus on the terms necessary for the parties to arrive at an enforceable settlement.
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When it’s time to negotiate a settlement, having an experienced family lawyer on your side is critical. Johnson Miller Family Lawyers is proud to be a trusted resource for clients, lawyers, and other professionals in the Windsor area. To learn how we can help you with the mediation process and your unique case, call us today at 519.973.1500 or contact us online.
