Are We Done Yet?

AuthorMichael Erdle
DateDecember 07, 2018

If parties are successful in reaching an agreement at the end of a long day (or more) of mediation, one of the final challenges is preparing a written document everyone can sign to capture the terms of the settlement.

One difficulty is to make it detailed enough to cover all of the essential terms, without leaving any loose ends.

Another is to avoid getting bogged down with overly complex legal drafting that can simply open up new issues or unravel a still-fragile agreement.

The more complex the settlement, the more difficult it is to balance these two competing challenges. It’s fairly simple when the settlement involves a one-time payment to settle a claim, together with mutual releases. It’s much more difficult when there’s an ongoing relationship between the parties and the agreement involves continuing obligations on both sides.

There’s a natural temptation, when agreement “in principle” has been reached, to “fine tune” the detailed terms to each party’s advantage. Be careful it doesn’t lead to either no agreement, or one that wasn’t intended.

A recent case in the Federal Court illustrates this danger and provides a timely reminder of the importance of having a clear settlement agreement.

Though not involving mediation, the Court in Betser-Zilevitch v Nexen Inc., 2018 FC 735 was faced with an agreement “in principle” to settle a patent infringement action.

After lengthy correspondence between counsel, with multiple offers and counter-offers, Betser-Zilevitch proposed terms which included a patent license, release from all claims, no further legal action by either party and a confidentiality agreement. (The offer, as set out in the decision [22] also included one term that is fully redacted. References to this term, which appears to relate to confidentiality, are redacted throughout the judgment [see 89-93].)

Nexen said it was “prepared to agree in principle” and would prepare a settlement agreement on those terms and “other standard settlement terms.” Betser-Zilevitch then advised the Court, on consent, that a settlement had been reached subject to formalization.

In fact, the parties could not agree on all the terms of the formal agreement and Betser-Zilevitch tried to withdraw the settlement offer. Nexen brought a motion to enforce the settlement and was successful. The court found that there was a binding agreement to settle, determined several implied terms on which the parties could not agree, and discontinued the action.

The court found a clear...

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