how to settle a claim and how not to
DESCRIPTION
Do you have a claim or is someone making a claim against you. We have put together a brief presentation covering off the following; Concurrent liability Cheque in full and final settlement Mistake Misrepresentation Enforcement Third party rights Do contact Gannons Solicitors if you require further help.TRANSCRIPT
• Concurrent liability
• Cheque in full and final settlement
• Mistake
• Misrepresentation
• Enforcement
• Third party rights
What is a settlement?
• Settlement is a contract
– Offer
– Acceptance
– Consideration
– Certainty
– Intention to create legal relations
Concurrent liability
• A and B are both liable to X
– Tort
• Jointly
• Severally
– Contract
• Jointly
• Severally
The opposing interests
• X’s interest: wants to settle with A and
then pursue claim against B
• Does A care?
– B might claim against A, e.g.
indemnity, Civil Liability (Contribution)
Act 1978
– A’s interest: to prevent X suing B
The “full satisfaction” question
• Where A and B separately cause X the
same loss, does X still have a cause of
action against B after accepting a sum in
full satisfaction of his claim against A?
• The issue – does the claim still exist?
The “final settlement” question
• Is it inconsistent with X’s full and final
settlement with A to permit X to pursue
B for the same heads of loss, leading B
to seek a contribution from A?
• The issue – did the settlement cover
the full loss?
• Question of construction of the
agreement between X and A
Final settlement – principles
• Releasing one tortfeasor/contract-breaker will
(joint) or may (several) release another
• Agreement between X and A does not affect
X’s rights against B
• Clear language between X and A says little
about whether agreement covers X’s full loss
• Absence of reservation of right by X to sue B
is not conclusive
When settling
• Be clear and be specific!
• Reservation of rights – X settles with A but
reserves right to sue B
• Covenant not to sue – X does not settle the
claim against B, merely agrees not to pursue
it
• Undertaking by X not to sue B
• Indemnity from X against claims by B
Being specific – BCCI v Ali [2001] UKHL 8
“In full and final settlement of all or any claims
whether under statute, common law or in
equity of whatsoever nature that exist or may
exist and, in particular, all or any claims, rights
or applications of whatsoever nature that the
applicant has or may have or has made or
could have made or could make in or to the
Industrial Tribunal except the applicant’s rights
under the respondent’s pension scheme”
Questions to ask
• If paying:
– Is there anyone else who might claim
against me?
– What is going to stop them or how will I
deal with that?
• If receiving:
– Is there anyone else I might want to claim
against?
– What in this settlement might stop me?
The cheque in full and final settlement
1. Open admission of amount due?
– no consideration for a settlement
2. Offer of sum in compromise?
– Accord and satisfaction?
– Consideration for the accord?
Is there an offer to settle a dispute which is accepted?
Beware of third party funds
Mistake
• Usual contractual principles
• Unilateral mistake – upheld unless other party aware and tried to take advantage
• Mutual mistake (parties think different things) – court will do its best to find a reasonable interpretation but that will be binding
• Common mistake – same mistaken belief, contract void only if fundamental
Misrepresentation
• Usual contractual principles
• Types of misrepresentation
– Innocent
– Negligent
– Fraudulent
Fraudulent misrepresentation
• False representation of a material fact, made
prior to the compromise and which induces it,
may, at the instance of the party misled,
operate to vitiate the compromise
Misrepresentation – examples
• Assertion of claim known to be baseless
• Representation true at the time made but
becoming false before the compromise
• Statement of intention of future conduct is
not a representation (unless false when
made) – no duty to disclose change of mind
• BUT representation of settled intention
when no such intention exists can be a
misrepresentation
Court order or judgment
• When proceedings have been issued
• By consent
• Only orders within the court’s jurisdiction
– Tomlin orders
• Ordinary execution/enforcement
No order or judgment
• Either where
• proceedings issued
• no proceedings
• Settlement operates as a defence to the
original claim
• Must sue on the contract for settlement
• agreement for order
Rights of third parties
• General contractual rule
– only parties can enforce
– privity of contract
• BUT Contracts (Rights of Third Parties) Act 1999
– Existing third party rights
– Creating third party rights
Existing third party rights
• Parties may require a third party’s consent to a
settlement
• Protection of promisor from double liability
• may not protect promisor if he gives benefit rather than
pays money
A settlement is a contract
• All the usual rules apply
• Think about boilerplate
• Think about enforcement
This information is designed to provide a
summary of the issues addressed. Therefore, it
is not intended as a detailed commentary on
the relevant law and any comments made
should not be acted upon without first taking
specific legal advice.
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