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Court Explains the Requirements of a Settlement Agreement

Recently, in the State of Louisiana Court of Appeal for the Third Circuit, a case was decided that effectively laid out the requirements of a settlement agreement. These requirements are especially important because many cases are settled before they get to court. In fact, settlement is often preferable because it saves a significant amount of time, money, and it allows the parties to reach a compromise that they not only come up with themselves, but that is also acceptable to both parties. That way, the parties share the benefits instead of there being a clear-cut loser and clear-cut winner as is usually the situation should a case go to trial.

In this case, an individual was seeking to enforce a settlement agreement with an insurance company regarding a life insurance policy. The life insurance policy involved three beneficiaries; however, it was unclear as to when the money should go to each beneficiary. There may have been a contingent beneficiary. That is, the policy was set up so that if one of the beneficiaries had passed away prior to the money dispersion, then it would go to a different beneficiary. However, the insurance company was unsure of this stipulation, so they did not give out any money at all.

As a result of all of this confusion, one of the beneficiaries entered into negotiations with the insurance company in order to get at least some money out of the life insurance policy. Louisiana Civil Code, Article 3071, defines compromise as “a contract whereby the parties, through concession made by one or more of them, settle a dispute or an uncertainty concerning an obligation or other legal relationship.” Therefore, the parties in this case sought to compromise regarding the payment of the insurance policy.

In addition to defining compromise, the Court also points out that the settlement agreement must be in writing and signed by both parties as required by Louisiana Civil Code Article 3072. In this case, there was an oral agreement, but when the parties attempted to put the terms in writing, there was still dispute regarding the agreeability of quite a few of the terms of the settlement. They created drafts and sent them back and forth, but nothing was ever finalized by way of a signature from either party. The Court recognizes that there are no other cases where a settlement was validated even though neither party signed the final settlement agreement.

The Court also goes on to explain that contracts, which are the basis of a compromise, require that there be a “meeting of the minds.” That is, both parties should completely understand and agree to the terms in the contract. The contract embodies the intention of both parties and if the intention of both sides is not fully included in the settlement, then that settlement cannot be valid. In this case, both sides described other terms that were either not included in the agreement or that appeared, but they did not approve of their inclusion in the settlement. The Court notes that there was no “acceptance and acquiescent from both parties” in this case.

Although the settlement agreement can be included in more than one document, it is apparent that there was no such agreement. It based this conclusion on the testimony of both parties, lack of signature on the settlement agreement, and other communications between the parties at the negotiation stages in this case (such as letters between the attorneys that expressed displeasure with terms in the agreement). Therefore, the Court concluded that a settlement agreement did not actually exist and that it could not enforce a settlement agreement that does not actually exist.

Obtaining settlement agreements can be somewhat complicated because they involve getting both sides to agree to many different terms. However, they are very valuable because they allow the parties to avoid trial and get their conflicts resolved quickly. The Berniard Law Firm is always interested in solving our clients’ problems quickly and effectively.

If you have a legal issue that is concerning you, please call the Berniard Law Firm toll free at 1-866-574-8005 and we will be happy to discuss your legal issues with you.