Beware omitting ‘subject to contract’

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The High Court’s decision in Newbury v Sun Microsystems is a useful reminder that expressing offers to settle simply as ‘without prejudice’ or even ‘without prejudice save as to costs’ may not be sufficient to leave the door open for further negotiation. Without including the words ‘subject to contract‘ as well, you might find a binding agreement has formed before you actually wanted it to and without all desired terms being included.

The case concerned a claim for commission in the region of $2m (£1,300,000) and a counterclaim for alleged overpaid commission. The parties were about to commence an expensive eight-day trial and all previous attempts to settle the dispute had failed.

On 3 June 2013, the defendant’s solicitors wrote to the claimant’s solicitors proposing an offer to settle which was described as their client’s final position. The terms of the offer were to pay a settlement sum in excess of £600,000 within 14 days of acceptance of the offer, in full and final settlement of the claim and counterclaim, together with £180,000 in legal costs. ‘Such settlement’ was to be ‘recorded in a suitably worded agreement’. It was available for acceptance until 5pm that day…

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