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CONTRACTS 4: An agreement to settle a pending lawsuit constitutes a contract.

In this case, the trial court granted plaintiffs’ motion to enforce a settlement agreement. Defendants argued that the parties had reached only a preliminary agreement in principle rather than a final binding settlement and that the alleged agreement did not satisfy the requirements of MCR 2.507(G).

Plaintiffs initiated this action as a result of a dispute over the use and maintenance of an access easement on defendants’ property that plaintiffs had used over several decades. Defendants filed a counterclaim alleging encroachment along the driveway and encroachment on their property following plaintiffs’ removal of a farm fence along the westerly boundary of easement. The parties’ attorneys entered into negotiations and reached a settlement in principle as documented in a series of e-mail exchanges.

Subsequently, the parties reported to the trial court that they had reached an agreement in principle, and they requested two stipulated adjournments in order to allow the parties to begin performance and to complete the settlement. Several months later, however, defendants’ counsel withdrew as attorneys for defendants, and defendants denied that an enforceable settlement had been achieved.

The trial court subsequently granted plaintiffs’ motion to enforce the settlement agreement.

Defendants argue that the trial court abused its discretion in granting plaintiff’s motion to enforce the settlement agreement because the requirements of MCR 2.507(G) were not met.

An agreement to settle a pending lawsuit constitutes a contract, and therefore the agreement is governed by legal principles applicable to the interpretation and construction of contracts. Like other contracts, a settlement agreement must include an offer and acceptance, as well as mutual assent or a meeting of the minds on all essential terms. Acceptance must be unambiguous and in strict conformity with the offer; otherwise, no contract is formed.

Also, an agreement or consent between the parties or their attorneys respecting the proceedings in an action is not binding unless it was made in open court, or unless evidence of the agreement is in writing, subscribed by the party against whom the agreement is offered or by that party’s attorney.

A signature at the bottom of an e-mail meets this criterion so long as the e-mail also contains the terms of the settlement.

In this case, on December 13 plaintiffs’ counsel sent an e-mail to defendants’ counsel that stated the terms of the settlement.  Both the December 13 reply, which specifically indicated defendants’ counsel’s agreement, and the December 15 reply, which confirmed that the parties had an agreement in principle, contained the attorney’s name typed at the end of the message. Therefore, the subscription requirement of MCR 2.507(G) was satisfied.

The proposed settlement agreement e-mails, stipulations evidencing that an agreement was reached, and the parties’ actions were sufficient to create an enforceable contract between the parties.

Aldrich Legal Services represent clients in all areas of real estate law and business law. You will work with an attorney who has the extensive contract experience necessary to help you reach an effective resolution that protects your interests.

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