As I discussed in a blog post several years ago, even an informal email can constitute acceptance of a contractual offer. Moreover, just a few months ago, Judge Timothy Hillman took this principle one step further by ruling, in Witt v. American Airlines, that an exchange of emails can form a binding settlement agreement, even if the parties have not agreed to all of the terms of that settlement.
In 2014, Diane Witt sued American Airlines for injuries she claimed to have sustained while on a flight. After litigating that case for more than three years, the parties finally engaged in serious settlement discussions. Ultimately, American Airlines’ counsel sent the following email to Witt’s counsel:
I have been informed $15,000 is firm (together with acceptable release) and that the settlement must happen promptly before more costs are incurred. This really needs to get done this week and certainly before any further hearing for the experts have to spend any more time preparing for deposition.
Witt’s counsel eventually responded: “Thanks for getting back to me. Ms. Witt accepts the settlement offer of $15,000. Please send the proposed release when you can.”
Less than one month later, however, Witt’s counsel informed American Airlines’ counsel that Witt did not want to go through with the settlement. American Airlines then filed a Motion to Enforce Settlement Agreement, and that Motion was allowed. In doing so, Judge Hillman held that:
An enforceable settlement agreement arises in Massachusetts when all of the parties to be bound mutually assent to all material terms even if those terms are not memorialized in a final writing. I find that in this case, the settlement terms were clearly defined and the parties evidenced willingness to be bound by them.
As part of his ultimate Order, Judge Hillman (i) directed American Airlines to proffer “an appropriate release to Witt,” (ii) directed Witt to execute such release within 17 days, and (iii) ruled that if Witt did not execute the release, it would be “deemed executed” at the end of the 17th day.
The implications of Witt can be important to in-house counsel in several respects. As an initial matter, the legal principles at issue in Witt are applicable to all manner of contracts and contract negotiations; they are not limited to settlement agreements and/or email communications. Further, understanding these principles can be helpful beyond simply ensuring that in-house counsel do not unintentionally enter into a binding agreement. For instance, assume that you have reached agreement on all of the key terms of a deal, and you can live with any reasonable variations of the unresolved terms. You could memorialize that agreement in an email or letter stating the following:
While we have a few open items, it is our understanding that we have agreed to all of the material terms of a contemplated business arrangement between our respective companies, and those terms are the following:
Please let me know that you concur with the forgoing and we can move on to the final phase of our negotiation.
If Jill sends an email back saying, “I concur,” you likely have a binding agreement. As such, if the other party later tries to renege on the agreement, or tries to add additional terms that never were contemplated, you probably can blunt such efforts and enforce the terms set out in the email. Again, however, it is important to keep in mind that if you seek to implement such a strategy, you may have to live with a contract that only has the material terms you itemized and any reasonable variation of the un-agreed to ancillary terms.