Settlement Agreements—Not Always the End When Lacking Mutual Consent
The day is finally here and your case is settled. But is it really over? Let’s go over some key issues in regards to mutual consent in settlement agreements and make sure.
First things first, a settlement agreement is a contract, to be interpreted and tested by established rules relating to contracts. A valid contract exists only where there has been a “meeting of the minds” as to all the essential terms of the agreement. Material terms generally means anything essential to the bargain, such as amount of settlement. The fact that a few secondary issues remain to be resolved will not defeat enforcement. If a court finds the material terms of a contract are overly vague or not definitive enough to provide a basis for mutual consent, it will not enforce the agreement.
Often times a court will find no mutual consent where a settlement agreement includes a provision that a release will be drafted later. Disagreements as to the terms of the release have caused many settlement agreements to fail. Similarly, where parties provide in the settlement agreement that the release to be delivered later is to be “mutually agreeable to both parties”, courts have refused enforcement of the entire agreement because there was no meeting of the minds on that material term.
Keeping that in mind, North Carolina courts will not recognize lack of mutual consent when a party claims that it had not signed the agreement, and that the signature of his attorney was not authorized. North Carolina courts presume that an attorney acts under the authority and in favor of the client, even in settlement circumstances. One who challenges the actions of his attorney has the burden of rebutting the presumption and proving lack of authority.
Ensuring that mutual consent occurs and that all settlement terms are well documented is critical, but that is only part of the settlement agreement process.