Renewable Energy Installer
January 2012
Legal Eagle
Unfortunately, despite best efforts, there are times with legal wrangles arise. Kinshuk Chatterjee, lawyer at Zaiwalla & Co Solicitors, offers advice on the settlement of disputes between companies
Where there is a business, particularly one which involves cross dealings with third parties, legal disputes do arise and businessmen do get involved in legal suits. It is advisable that parties should aim at settling the claim. Not always will the claimant get every penny of his claim amount but litigation proceedings involve costs and are time consuming. In addition, it often results in souring the relations between two business groups forever.
A legal settlement must be conducted and finalised with caution. There have been numerous examples in the past where parties have approached the court to determine what the terms of the settlement were. This negates the purpose of concluding a settlement in the first instance. The terms of the settlement should be clear and well understood between the parties, in other words the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.
Although a legal settlement is a contract, there is no requirement for a standard form for a settlement to be concluded. Settlement agreements are governed by principles of contract law and a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of a contract formation are present.
English courts have a strong propensity to uphold contracts. Therefore a party who subsequently raises an argument that it was not its intention to enter into a binding agreement has to make a very strong argument in court. This can be a daunting task especially if there is no written communication to this effect. Therefore parties should make their intention very clear in writing/ correspondence that they do not consider themselves to be contractually bound. Likewise, consideration is also an important aspect whilst negotiating a legal settlement. A party should understand the value in exchange of which it will agree to relinquish its right to bring or continue its claim in a court of law. Courts do not value the consideration that moved from one contracting party to the other. In other words, a court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate but rather whether it was sufficient to fulfil the mandates of a valid consideration under the law of contract.
Therefore parties should make their intention very clear even in informal exchanges as a simple “yes” or “no” in written communication could be said to reflect a party’s intention to settle a matter.
Tank Storage Magazine
January 2012
Settling disputes in the UK
When a legal claim arises, the temptation may be to settle, but caution needs to be exercised in the negotiation process. It is important for companies to know when to involve solicitors.
In any business, particularly ones which involves cross-dealings with third parties, disputes invariably arise and businessmen get involved in legal suits. There is an apprehension that once a case has begun it will continue for a long time, and that litigant will have to bear the costs of the litigation and the legal costs of their adversary, should the claim be decided against them. Therefore, it is advisable parties aim to settle the dispute.
Provisions have been made in legal procedures which allow parties the scope to make a legal settlement. A Part 36 Offer, as it is popularly called, is a self contained code and provides guidelines for parties on how to make or accept an offer to settle. Interestingly, a Part 36 offer must be in writing and state whether it relates to the full claim or a part thereof and it also allows an opportunity for the person receiving the offer (the offeree) to seek clarifications of the offer made by the offeror.
Parties should exercise abundant caution in making an offer of settlement and conducting settlement dialogue, as it needs to be absolutely sure they conclude a settlement only of that dispute which they intend and no more. There have been numerous examples in the past where parties have approached the court to decide what the terms were of a settlement that was made between the two sides themselves. This negates the purpose of concluding a settlement in the first place. The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment and offer the other a benefit. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.
Although a legal settlement is a contract, this does not mean it can only exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present. The English Court in Golden Ocean Group Limited v Salgaocar Mining Industries Limited & another did not accept the argument that if an agreement had been made in writing, there was some limit to the number of documents to which reference was permissible. If there was said to have been an agreement in writing, the court was entitled to look at those documents which were said to constitute the agreement, however many they may be.
There is no requirement for parties to place their signature on a single piece of paper, which can then be forever pin-pointed as ‘the’ legal settlement between the parties. The legal principle that a settlement is for all intents and purposes an enforceable agreement means the essentials of a valid contract ought to be present; a document having the appearance of an agreement is not enough. One may derive comfort from the thought that ‘if I didn’t sign the document, it isn’t a contract’. That thought can be potentially dangerous. If parties have given full effect to an unsigned document through their conduct, the court shall consider that there was a contractual agreement between parties. There are, of course, exceptions to this. Transactions for the transfer of property are agreements where signature of parties is a sine qua non for execution of the contract.
It is also a myth that where the subsequent execution of a further document is contemplated by the parties at the time of what would otherwise be an agreement, that agreement at first instance, whether a single document or a chain of correspondence, is not a binding contract. The intention of parties to create legal contractual relations will be inferred from the conduct of parties: does that conduct suggest that they intended the future document actually to constitute the real agreement, or was it just to be a record of what was already an established agreement between parties? This is an objective test which courts use to ascertain whether an agreement was concluded.
English courts have a strong propensity towards upholding contracts. This is because it is presumed that parties intended to create a legal relationship when entering into a settlement. Therefore, if a party who appears to have made a settlement wants to raise an argument afterwards that it was not its intention to enter into the settlement, it has to make a very strong argument in court. This can be a daunting task, especially if there is no written communication to prove this lack of intention. Therefore, parties should make their intentions very clear in writing, stating that they do not consider themselves to be contractually bound to a legal settlement if that is actually how they feel.
This presumption in favour of upholding settlements is an extension of the principle of consensus ad idem; the Court will conduct an objective test to establish whether the parties were ‘of a mind’, in that they both wanted to create the same legally enforceable settlement. Therefore, a party who intends to displace this presumption is required to make an objective argument that, given the circumstances of the case, it would be incorrect to presume that a legal settlement had been concluded. An argument the party itself did not intend to conclude a legal settlement is a subjective argument and as such would not hold water before an English court or tribunal.
The English courts in such cases take the test of the ‘reasonable bystander’. If a reasonable bystander on his observation found that correspondence between parties had resulted in making an offer and acceptance of that offer, it would not matter that one party did not intend to conclude a legal settlement.
Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a court of law. Courts do not make judgments on whether the consideration that moved from one party to the other represents good value to the recipient, only on the question of whether any consideration was present. In other words, a court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the requirement of valid consideration under the law of contract. The result of that is that a party who makes a bad bargain cannot look to the courts to help it out.
In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain music records were part of the consideration of the contract, notwithstanding that the company would throw away the wrappers once they were received.
A promise made by a defendant that it will consider the claimant for future business if the latter drops its claim against the former is valid consideration. An offeree cannot then complain that it did not make profit from any future business, and as such there was actually no consideration. In such a case the consideration for dropping the claim was ‘to consider the claimant for future business’ and not ‘to do future business.’ Therefore the fact that the claimant ultimately forsake his claim without ever any monetary benefit is immaterial.
A business person, or for that matter any one who is not well-acquainted with legal nuance, will often use words without stopping to consider that a word used by him may be construed by another in a totally different sense to that which the author had intended. Therefore, parties should make their intentions very clear even in informal exchanges: a simple ‘yes’ or ‘no’ in written communications could be said to reflect a party’s intention to settle a matter.
The presence of a solicitor whilst settlement negotiations are ongoing is always helpful, because the settlement can then be made as watertight as possible, which will in turn ensure that parties do not have to approach the court in future to resolve the issue whether or not there was a settlement, or what its terms where.
Whether a party handles its own legal settlement or is represented by a lawyer, the key is to make the party’s intentions crystal clear. A claimant must be aware that, in effecting a legal settlement, it is essentially giving up its right to bring the claim again in a court of law, and therefore all the issues in the dispute that it wanted to resolve should be meticulously spelled out. This ensures that parties are on the same footing whilst the negotiation is being finalised, and makes an out of court settlement final and meaningful.
For more information:
This article was written by Kinshuk Chatterjee, a lawyer at Zaiwalla & Co Solicitors. k.chatterjee@zaiwalla.co.uk; +44 207 312 1000; www.zaiwalla.co.uk
Heating and Ventilation News
30th November 2011
Conducting and settling disputes requires caution
On introducing myself as a lawyer to a gentleman I met at a recent party, he quipped that he had been enjoying himself thoroughly until I told him I was a lawyer. He then wanted to know how many of us lawyers were at the party. Businessmen clearly despise legal disputes, and given their way they would have nothing to do with lawyers. The real business world, however, does not work like that.
Where any business is trading, particularly one which involves cross-dealings with third parties, disputes arise and businessmen get involved in legal suits. It is advisable that parties should aim to settle the claim. A claimant will not always get every penny of the amount he claims, but litigation proceedings incur costs and are time-consuming, and they often permanently sour the relations between businesses.
A legal settlement must be conducted and finalised with caution. There have been numerous examples in the past where parties have approached the Court to decide what the terms were of the settlement that was made by the two sides themselves. This negates the purpose of concluding a settlement in the first place.
The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself.
A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.
Although in essence a contract, this does not mean that it can only exist as a single, signed legal document. Settlements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present.
English Courts have a strong propensity towards upholding contracts. Therefore, a party who raises an argument subsequent to the contract that it was not its intention to enter into a binding agreement has to make a very strong argument in Court. This can be a daunting task, especially if there is no written communication to this effect.
Parties should make their intentions very clear in writing, stating that they do not consider themselves to be contractually bound if that is actually how they feel. Consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to continue its claim.
Courts do not make judgements on the value of the consideration that moved from one party to the other, only on the question of whether consideration was present. The result of that is that a party who makes a bad bargain cannot look to the Courts to help them out.
Therefore, parties should make their intentions very clear even in informal exchanges: a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter.
Kinshuk Chatterjee is a lawyer at Zaiwalla & Co Solicitors
Site Recorder
1st December 2011
Settlement of Disputes
In any business, particularly one which involves cross-dealings with third parties, disputes invariably arise and businessmen get involved in legal suits. There is an apprehension that once a case has begun it will continue for ages, and that litigant will have to bear the costs of the litigation and the legal costs of their adversary, should the claim be decided against them. Therefore, it is advisable that parties should aim to settle the dispute.
Provisions have been made in legal procedures which allow parties the scope to make a legal settlement. Part 36 of the Civil Procedure Rules provides a statutory procedure for parties on how to make or accept an offer to settle. These directives serve a significant purpose in reducing uncertainty between parties regarding proposed terms of settlement. However, all legal settlements do not emanate from Part 36 offers made by a litigant to its adversary, especially in arbitration proceedings, which are not governed by the rigours of Civil Procedure Rules.
When making an offer of settlement, abundant caution should be exercised in making an offer of settlement and conducting settlement dialogue, as a party needs to be absolutely sure that he concludes a settlement only of that dispute which he intends and no more.
There have been numerous examples in the past where parties have approached the Court to decide what the terms were of a settlement that was made between the two sides themselves. This negates the purpose of concluding a settlement in the first place. The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment and offer the other a benefit. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.
Although a legal settlement is a contract, this does not mean that it can only exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present. The English Court in Golden Ocean Group Limited v Salgaocar Mining Industries Limited & another did not accept the argument that if an agreement had been made in writing, there was some limit to the number of documents to which reference was permissible. If there was said to have been an agreement in writing, the Court was entitled to look at those documents which were said to constitute the agreement, however many they may be.
Following the above, there is no requirement for parties to place their signature on a single piece of paper, which can then be forever pin-pointed as ‘the’ legal settlement between the parties. The legal principle that a legal settlement is for all intents and purposes an enforceable agreement means that the essentials of a valid contract ought to be present; a document having the appearance of an agreement is not enough. So much so, that if parties have given full effect to an unsigned document through their conduct, the Court shall consider that there was a contractual agreement between parties. There are, of course, exceptions to this. Transactions for the transfer of property are agreements where signature of parties is a sine qua non for execution of the contract.
It is also a myth that where the subsequent execution of a further document is contemplated by the parties at the time of what would otherwise be an agreement, that agreement at first instance, whether a single document or a chain of correspondence, is not a binding contract.
English Courts have a strong propensity towards upholding contracts. This is because it is presumed that parties intended to create a legal relationship when entering into a settlement. Therefore, if a party who appears to have made a settlement wants to raise an argument afterwards that it was not its intention to enter into the settlement, it has to make a very strong argument in Court.
This presumption in favour of upholding settlements is an extension of the principle of consensus ad idem; the Court will conduct an objective test to establish whether the parties were ‘of a mind’, in that they both wanted to create the same legally enforceable settlement. Therefore, a party who intends to displace this presumption is required to make an objective argument that, given the circumstances of the case, it would be incorrect to presume that a legal settlement had been concluded. An argument that the party itself did not intend to conclude a legal settlement is a subjective argument and as such would not hold water before an English Court or Tribunal.
Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a Court of law. Courts do not make judgements on whether the consideration that moved from one party to the other represents good value to the recipient, only on the question of whether any consideration was present. In other words, a Court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the requirement of valid consideration under the law of contract.
In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain music records were part of the consideration of the contract, notwithstanding that the company would throw away the wrappers once they were received.
A business person, or for that matter any one who is not well-acquainted with legal nuance, will often use words without stopping to consider that a word used by him may be construed by another in a totally different sense to that which the author had intended. Therefore, parties should make their intentions very clear even in informal exchanges as a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter.
Kinshuk Chatterjee is a Lawyer at Zaiwalla & Co Solicitors, a niche London law firm specialising in international commercial arbitration and litigation k.chatterjee@zaiwalla.co.uk 0207 312 1000 www.zaiwalla.co.uk
Food Processing
13th December
Settlement of Disputes
Author : Kinshuk Chatterjee
A legal settlement must be conducted and finalised with caution, particularly in the food industry where unnecessary expenses should be avoided at all costs.
In any business, particularly one that involves cross-dealings with third parties, disputes invariably arise and businessmen get involved in legal suits. There is an apprehension that once a case has begun it will continue for ages, and that litigant will have to bear the costs of the litigation and the legal costs of their adversary, should the claim be decided against them. Therefore, it is advisable that parties should aim to settle the dispute.
A legal settlement must be conducted and finalised with caution. There have been numerous examples in the past where parties have approached the Court to decide what the terms were of the settlement that was made by the two sides themselves. This negates the purpose of concluding a settlement in the first place.
The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.
It is a myth that a legal settlement has to exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present.
English Courts have a strong propensity towards upholding contracts.
Therefore, a party who raises an argument subsequent to the contract that it was not its intention to enter into a binding agreement has to make a very strong argument in Court. This can be a daunting task, especially if there is no written communication to this effect. Therefore, parties should make their intentions very clear in writing/correspondence, stating that they do not consider themselves to be contractually bound if that is actually how they feel.
Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a Court of law. Courts do not make judgements on the value of the consideration that moved from one contracting party to the other, only on the question of whether consideration was present.
In other words, a Court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the mandates of a valid consideration under the law of contract. The result of that is that a party who makes a bad bargain cannot look to the Courts to help them out.
In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain a music record from the company making this offer, were part of the consideration, notwithstanding that the company would throw away the wrappers once received.
Therefore, parties should make their intentions very clear even in informal exchanges: a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter. One should bear in mind that not all legal disputes can be settled in the same manner as disputes which involve some kind of pecuniary consideration.
There may be legal disputes involving infringement of compliance measures (product liability cases) imposed by a regulator or infringement of an intellectual property where permanent injunction from using the trademark or copyright is the standard remedy.
For instance in the manufacturing industry the company may often find itself in a dispute defending its intellectual property or defending itself against a personal injury claim or even a dispute involving breach of compliance measures. In such cases an out of court settlement is plausible only in the second case where the compensation amount can be negotiated with the Claimant.
Manufactures are also faced with trade union actions and often a settlement between the management and the union may result in striking of potential industrial action. For instance plans for industrial action were called off by workers of Heinz in the Kitt Green unit when a revised pay structure increasing basic pay by 3.9% was accepted by a majority vote. This apart manufacturing industries operating in the retail market are faced by claims by unhappy consumers. In such cases too the company should aim at concluding a legal settlement with the complainant, of course bearing in mind what has been discussed earlier.
* Kinshuk Chatterjee is a Lawyer at Zaiwalla & Co Solicitors.
Kinshuk Chatterjee, Zaiwalla & Co: k.chatterjee@zaiwalla.co.uk 0207 312 1000 www.zaiwalla.co.uk
The Expert and Dispute Resolver
Winter 2011
Settlement of Disputes
I recently met a gentleman at a party who quipped that he had thoroughly enjoyed meeting me until I told him that I was a lawyer. He then wanted to know how many of us lawyers were at the party. Businessmen clearly despise legal disputes, and given their way they would have nothing to do with lawyers. The real business world, unfortunately, does not work like that.
When any business trades, particularly in a way which involves cross-dealings with third parties, disputes invariably arise and businessmen do get involved in legal suits. There is an apprehension that once a case has begun it will continue for ages, and that litigant will have to bear the costs of the litigation and the legal expenses of their adversary, should the claim be decided against them.
A legal settlement is therefore an important tool for putting an end to legal proceedings and allowing parties to effect a compromise. In fact, it is advisable that parties should aim to settle the claim. A claimant will not always get every penny of the amount he claims. However, litigation proceedings incur costs and are time-consuming, and they often permanently sour the relations between two business groups.
Provisions have been made in legal procedures which allow parties the scope to make a legal settlement. Part 36 of the Civil Procedure Rules provides a statutory procedure for settlement which is complete in its own right. A Part 36 Offer, as it is popularly called, is a self contained Code and provides guidelines for parties on how to make or accept an offer to settle. Interestingly, a Part 36 offer must be in writing and state whether it relates to the full claim or a part thereof and it also allows an opportunity for the person receiving the offer ‘the offeree’ to seek clarifications of the offer made by the offeror.
These directives serve a significant purpose in reducing uncertainty between parties regarding proposed terms of settlement. However, all legal settlements do not emanate from Part 36 offers made by a litigant to its adversary. For instance, arbitration proceedings are not governed by the rigours of Civil Procedure Rules and parties are left much to their own discretion as to how best to make an offer of settlement through regularly exchanged correspondence.
When making an offer of settlement, parties should be cautious to compromise only to the extent they desire. A legal settlement is, more often than not, a full and final settlement where parties relinquish their right to re-litigate the issues at hand. Therefore, abundant caution should be exercised in making an offer of settlement and conducting settlement dialogue, as a party needs to be absolutely sure that he concludes a settlement only of that dispute which he intends and no more.
There have been numerous examples in the past where parties have approached the Court to decide what the terms were of a settlement that was made between the two sides themselves. This negates the purpose of concluding a settlement in the first place. The terms of the settlement should be clear and well-understood between the parties; in other words, the parties should be ad idem. A legal settlement is in essence a contract by itself. A promise is made by one party to the other that if the latter forgoes a legal claim, the former will suffer some detriment and offer the other a benefit. It is in consideration of this promise that the party intending to litigate its dispute settles the matter.
Although a legal settlement is a contract, this does not mean that it can only exist as a single, signed legal document. Settlement agreements are governed by principles of contract law, and so a chain of emails exchanged between two parties can result in legal settlement so long as the requirements of contract formation are present. The English Court in Golden Ocean Group Limited v Salgaocar Mining Industries Limited & another, did not accept the argument that if an agreement had been made in writing, there was some limit to the number of documents to which reference was permissible. If there was said to have been an agreement in writing, the Court was entitled to look at those documents which were said to constitute the agreement, however many they may be.
Following the above, there is no requirement for parties to place their signature on a single piece of paper, which can then be forever pin-pointed as ‘the’ legal settlement between the parties. The legal principle that a legal settlement is for all intents and purposes an enforceable agreement means that the essentials of a valid contract ought to be present; a document having the appearance of an agreement is not enough. One may derive comfort from the thought that “if I didn’t sign the document, it isn’t a contract.” That thought can be potentially dangerous. If parties have given full effect to an unsigned document through their conduct, the Court shall consider that there was a contractual agreement between parties. There are, of course, exceptions to this. Transactions for the transfer of property are agreements where signature of parties is a sine qua non for execution of the contract.
It is also a myth that where the subsequent execution of a further document is contemplated by the parties at the time of what would otherwise be an agreement, that agreement at first instance, whether a single document or a chain of correspondence, is not a binding contract. The intention of parties to create legal contractual relations will be inferred from the conduct of parties: does that conduct suggest that they intended the future document actually to constitute the real agreement, or was it just to be a record of what was already an established agreement between parties? This is an objective test which Courts use to ascertain whether an agreement was concluded.
English Courts have a strong propensity towards upholding contracts. This is because it is presumed that parties intended to create a legal relationship when entering into a settlement. Therefore, if a party who appears to have made a settlement wants to raise an argument afterwards that it was not its intention to enter into the settlement, it has to make a very strong argument in Court. This can be a daunting task, especially if there is no written communication to prove this lack of intention. Therefore, parties should make their intentions very clear in writing/correspondence, stating that they do not consider themselves to be contractually bound to a legal settlement if that is actually how they feel.
This presumption in favour of upholding settlements is an extension of the principle of consensus ad idem; the Court will conduct an objective test to establish whether the parties were ‘of a mind’, in that they both wanted to create the same legally enforceable settlement. Therefore, a party who intends to displace this presumption is required to make an objective argument that, given the circumstances of the case, it would be incorrect to presume that a legal settlement had been concluded. An argument that the party itself did not intend to conclude a legal settlement is a subjective argument and as such would not hold water before an English Court or Tribunal.
The English Courts in such cases take the test of the “reasonable bystander.” If a reasonable bystander on his observation found that correspondence between parties had resulted in making an offer and acceptance of that offer, it would not matter that one party did not intend to conclude a legal settlement.
Likewise, consideration is also an important aspect when negotiating a legal settlement. A party should understand the value it will receive in exchange for its agreement to relinquish its right to bring or continue its claim in a Court of law. Courts do not make judgments on whether the consideration that moved from one party to the other represents good value to the recipient, only on the question of whether any consideration was present. In other words, a Court of law will seldom adjudicate on the issue of whether the value exchanged between parties was adequate, but rather whether it was sufficient to fulfil the requirement of valid consideration under the law of contract. The result of that is that a party who makes a bad bargain cannot look to the Courts to help them out.
In a celebrated case, the House of Lords confirmed the doctrine that a court does not investigate the adequacy of consideration when it upheld the ruling that chocolate wrappers sent by members of the public to obtain music records were part of the consideration of the contract, notwithstanding that the company would throw away the wrappers once they were received.
A promise made by a Defendant that it will consider the Claimant for future business if the latter drops its claim against the former is valid consideration. An offeree cannot then complain that it did not make profit from any future business, and as such there was actually no consideration. In such a case the consideration for dropping the claim was ‘to consider the Claimant for future business’ and not ‘to do future business.’ Therefore the fact that the Claimant ultimately forsake his claim without ever any monetary benefit is immaterial.
A business person, or for that matter any one who is not well-acquainted with legal nuance, will often use words without stopping to consider that a word used by him may be construed by another in a totally different sense to that which the author had intended. Therefore, parties should make their intentions very clear even in informal exchanges: a simple “yes” or “no” in written communications could be said to reflect a party’s intention to settle a matter.
The presence of a solicitor whilst settlement negotiations are ongoing is always helpful, because the settlement can then be made as watertight as possible, which will in turn ensure that parties do not have to approach the Court in future to resolve the issue whether or not there was a settlement, or what its terms where.
Whether a party handles their own legal settlement or is represented by a lawyer, the key is to make the party’s intentions crystal clear. A Claimant must be aware that, in effecting a legal settlement, it is essentially giving up its right to bring the claim again in a Court of law, and therefore all the issues in the dispute that it wanted to resolve should be meticulously spelled out. This ensures that parties are on the same footing whilst the negotiation is being finalised, and makes an out of court settlement final and meaningful.
Kinshuk Chatterjee is a Lawyer at Zaiwalla & Co Solicitors
Kinshuk Chatterjee, Zaiwalla & Co. Having qualified in 2007, Kinshuk joined the Supreme Court of India and was posted as a legal assistant to The Honerable Mr Justice Dalveer Bhandari. Thereafter he moved to the UK for a Masters degree specialising in corporate governance. Kinshuk has been involved in corporate litigations, breach of confidentiality claims and also advises on start-ups and privately owned businesses.
