NYLJ “Tentative Settlement Agreement Unenforceable Without Intent to Be Bound”
By Thomas E.L. Dewey
Parties commonly agree on the monetary value of a settlement before beginning work on formal settlement documents. Xie v. Caruso, Spillane, Leighton, Contrastano, Savino & Mollar, No. 18-cv-12092 (JPO), 2022 WL 4547377 (S.D.N.Y. Sept. 29, 2022), illustrates that even if the parties reach an understanding on the settlement amount, a settlement agreement is not enforceable until it meets certain other criteria. When determining whether to enforce an unsigned settlement agreement, courts will closely examine drafts of the agreement and any unresolved issues between the parties. Enforceability of the settlement agreement will turn on whether the parties demonstrated an intent to be bound by the agreement. Courts will not enforce a draft settlement agreement that contains terms evincing an intent to be bound only upon formal execution, nor will they ignore the fact that parties had significant points of contention standing in the way of a final agreement.
This article first appeared in the New York Law Journal on February 16, 2023. Christine Kim, an associate at the firm, assisted in the preparation of the article.