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Can you enforce a settlement agreement even if it is unsigned?

Settlement Agreement

An attorney’s right to enforce an unsigned settlement agreement recently came before a Utah District Court.  According to the court’s opinion, the plaintiff and the remaining defendant, through their respective counsel, engaged in settlement negotiations.  In an email, counsel for the plaintiff stated that the plaintiff had authorized its counsel to discuss with defendant a potential settlement where both sides would bear their own attorney fees and costs.

Defendant’s counsel drafted a settlement agreement, which was provided to counsel for the plaintiff.

Plaintiff’s counsel made some minor revisions to the agreement and returned the agreement to defendant’s counsel.  Defendant accepted plaintiff’s revisions and signed the agreement.  However, plaintiff refused to sign the agreement.  As a result, defendant sought enforcement of the agreement.

In response to defendant’s motion to enforce the settlement, the plaintiff made several arguments why the settlement should not be enforced.  First, the plaintiff argued that it and its counsel did not have the authority to act on behalf of its lenders.  The court noted that “[w]hether Plaintiff or Plaintiff’s counsel had the authority to act on behalf of the Lenders is irrelevant to the determination of [defendant’s] motion.”  This was true because “[w]hile Plaintiff alleges that the Lenders are the ultimate victims, the Lenders are not parties to this action.  Any claims that the Lenders may have against Cobalt are not before this Court and the Court expresses no opinion as to those claims.” 

Even still, the plaintiff contended that it did not have the authority to settle absent approval from the lenders.  However, the plaintiff never communicated this to the defendant, and, as a result, the “[p]laintiff [could not] now use it as a basis to avoid the agreement reached by its counsel.”

Second, plaintiff argued that the settlement was not binding because it was unsigned.

The court rejected this argument, noting that a contract may be enforced absent a signature, unless the contract falls within the statute of frauds.  According to the court, “[p]arties have no right to welch on a settlement deal during the sometimes substantial period between when the deal is struck and when all necessary signatures can be garnered on a stipulation.”

Plaintiff also argued that the settlement agreement was not enforceable because the parties were still revising the terms of the agreement.

The court found plaintiff’s argument to be an inaccurate reflection of the facts because there was no evidence that the negotiations over the agreement were ongoing after defendant accepted plaintiff’s proposed changes and sent a signed copy of the settlement agreement back to the plaintiff.

Plaintiff’s final argument concerned the nature and extent of the parties’ agreement.

Plaintiff argued that any settlement should be limited to the original terms discussed.  Plaintiff objected to any further provisions on the grounds that they would bind the lenders to the agreement and an agreement by plaintiff to indemnify defendant against the lenders.  The court concluded that the defendant had pointed to nothing suggesting that the court could enforce the agreement against the non-party lenders, and that it appeared that defendant was not seeking any such relief.

However, the court did find that plaintiff agreed to indemnify the defendant against claims by the lenders.  The plaintiff’s promise to indemnify the defendant against any claims by the lenders was contained in the agreement, and was never repudiated.  Therefore, the court would enforce the indemnity term as part of the agreement.