Employment Matters — February 2014: settlement negotiations ‘subject to contract’

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A recent case in the high court (Newbury v Sun Microsystems) illustrates the importance of ensuring that all settlement negotiations are stated to be ‘subject to contract’ — otherwise you could find yourself bound by a contract you did not intend to make.

In this case, in the context of a claim for unpaid commission, the employer’s solicitor wrote to the employee’s solicitor to propose an offer of payment ‘in full and final settlement of the claim’ to be paid within a certain time frame, with provision that ‘such settlement [was] to be recorded in a suitably worded agreement’.

The claimant’s solicitor accepted this offer on the claimant’s behalf in a letter marked ‘without prejudice save as to costs’ and agreed to forward a draft agreement setting out the terms. There was then a disagreement over the form of the agreement and the employer decided that it no longer wished to proceed with the settlement…

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