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Apr 2015

A recent Appeals Court decision highlights the perils of failing to memorialize all material terms of settlement agreements.  In J2 Interactive, LLC v. BlueWare, Inc., 87 Mass. App. Ct. 1106 (February 20, 2015) (Unpub.), the Court decided (pursuant to Rule 1:28, which is an unpublished “Summary Decision” that may be cited for persuasive value, but not as binding precedent) that it was error for the Superior Court to allow J2’s motion to enforce a settlement agreement where certain “essential terms” remained unresolved.  In so ruling, the Appeals Court reviewed de novo the parties’ settlement communications, consisting primarily of email communications, to determine whether they established a “sufficiently clear and complete agreement.” See Basis Technology Corp. v., Inc., 71 Mass. App. Ct. 29, 36 (2008).  The Court noted that while certain emails established that the parties were in agreement over one very material term – the amount that BlueWare would pay to settle J2’s claims – subsequent emails demonstrated that other material terms had yet to be worked out.  The Court determined, for example, that the parties had not agreed whether payments would be made in one or multiple installments; whether and what type if interest would accumulate on the remaining balance; or what would occur if timely payments were not made.  The Court further noted that equivocal language within in the emails between J2 and BlueWare evidenced that the parties did not have the requisite intent to be bound by any of the exchanged drafts.  Because “essential terms” remained unresolved and the parties demonstrated a “visible reservation of their commitment to be bound”, the Court, citing to Targus Group Intl., Inc., 76 Mass. App. Ct. 421, 429 (2010), held that the proposed agreement was incomplete and nonbinding.  The case illustrates the wisdom of insisting at the conclusion of a mediation that the parties sign a memorandum of settlement documenting the essential terms of the agreement, and noting that the parties intend to be bound to the settlement even though the parties intend to prepare a more comprehensive release and settlement agreement after the conclusion of the mediation.  

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