Ideally, productive mediations lead to settlements. Unfortunately, mediations can sometimes take a very long time. It isn’t surprising that after a long day of mediating, the wrongful dismissal lawyers might decide not to draft the formal minutes of settlement until the next day. While understandable, this decision could be a mistake.
In one recent case, choosing to delay drafting the materials had a serious consequence: the defendant employer decided they no longer liked the “agreement” that had been reached, but for which no formal document had yet been drafted. They took the position that no settlement had been reached at all.
The Mediation and Settlement
The plaintiff, Mr. Peres, was terminated from his position as President and CFO of the defendant employer. Mr. Peres commenced an action on December 2, 2020, which was the subject of a mediation that occurred on February 23, 2021. Present at the meeting was the plaintiff and his counsel as well as three representatives of the defendant and their counsel. Those representatives included the CEO and the Chair of the Board.
The mediation lasted all day. When the mediation was finally over, counsel exchanged emails summarizing and generally agreeing to the terms of the agreement. There was a list of five numbered points that defined the agreement. However, one provision of the agreement in particular, point 2, was problematic. It read, per plaintiff counsel’s email:
“2. 700,000 options are being granted in reasonable short order at a current exercise price and with an expiry date of November 10, 2023.”
To which defendant’s counsel replied:
“AGREED, SUBJECT TO BOARD APPROVAL ACTING REASONABLY.”
It was expected that the defendant would send the plaintiff draft minutes of settlement the next day. They did not. Instead, the defendant informed the plaintiff that the settlement as provided in the email did not receive the necessary Board approval.
At issue now is whether these emails, absent formally drafted minutes of settlement, constituted an agreement and whether that agreement can or should be enforced.
Was There An Agreement?
According the plaintiff, an agreement had been reached via email. The defendant used the word “AGREED”. The defendant later confirmed this in a subsequent email by saying “sounds good.”
On the other hand, the defendant argued that the emails were, at most, an agreement to agree, which is no agreement at all. There was no unequivocal offer or acceptance. Further, the entire settlement was subject to and conditional on the Board’s approval. The Board did not approve the agreement, thus there was no agreement.
After considering the perspective of each side, the trial judge found that there had indeed been an agreement. Although some further work was required in writing up the details, the parties had agreed on the essential terms of the agreement. The essential terms were clear, and the only remaining task was to put those essential terms into formal legal language. It was not necessary, strictly speaking, for the agreement to be produced in formal writing in order to be an agreement.
Is the Agreement Enforceable?
Having found that there was an agreement, the next question to be addressed was whether it can or should be enforced. Predictably, the defendant argued that it cannot and should not because the Board never approved the settlement as required by the emails forming the agreement. Although approval was only needed for point 2 of the agreement, the defendant argued this provision was an “essential pillar” of the overall agreement. If the Board did not approve this provision, they did not approve the rest.
The trial judge found that the agreement should be enforced in any event. The agreement stated that the board, acting reasonably, could disapprove. The trial judge found that there was no reasonable basis for the Board to decline the provision. That being the only provision in dispute, the rest of the agreement is capable of enforcement and should be enforced.
As such, the agreement reached by email was enforceable, despite not having been formally drafted or signed by the parties.
This case is an important reminder that what you say by email matters. You do not need formally drafted and executed minutes of settlement and release to have an enforceable agreement. If the essential terms of the agreement are clear, that will likely be enough.
Nevertheless, this entire situation could be easily avoided. Parties should be willing and able to present a formal settlement agreement promptly after the mediation has concluded. An easy way to accomplish this would be by having draft minutes of settlement, even in template form, prepared in advance so that you need only fill in the details discussed during the mediation. This would ensure there is no confusion moving forward and would prevent the possibility that one party might feel free to repudiate the agreement they reached at mediation.