How to settle a claim and how not to
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The document outlines the complexities of settling claims, including definitions of settlement, concurrent liabilities, and the implications of full and final settlements between parties. It discusses principles of contract law relevant to misrepresentation, mistakes, and enforcement of settlements, as well as the rights of third parties. The guidance emphasizes the importance of clear communication and specific agreements to avoid future disputes.
![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”](https://image.slidesharecdn.com/howtosettleaclaim-andhownotto-140610051700-phpapp02/85/How-to-settle-a-claim-and-how-not-to-10-320.jpg)
How to settle a claim and how not to
- 1. How to settle a claim…and how not to Alexander Kleanthous
- 2. • Concurrent liability • Cheque in full and final settlement • Mistake • Misrepresentation • Enforcement • Third party rights
- 3. What is a settlement? • Settlement is a contract – Offer – Acceptance – Consideration – Certainty – Intention to create legal relations
- 4. Concurrent liability • A and B are both liable to X – Tort • Jointly • Severally – Contract • Jointly • Severally
- 5. 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
- 6. 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?
- 7. 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
- 8. 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
- 9. 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
- 10. 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”
- 11. 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?
- 12. 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
- 13. 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
- 14. Misrepresentation • Usual contractual principles • Types of misrepresentation – Innocent – Negligent – Fraudulent
- 15. 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
- 16. 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
- 17. Enforcement • Two types of settlement – Court order/judgment – No court order/judgment
- 18. Court order or judgment • When proceedings have been issued • By consent • Only orders within the court’s jurisdiction – Tomlin orders • Ordinary execution/enforcement
- 19. 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
- 20. 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
- 21. 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
- 22. Creating third party rights • Act may give right to third party • Parties can contract out
- 23. A settlement is a contract • All the usual rules apply • Think about boilerplate • Think about enforcement
- 24. 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.
- 25. ANY QUESTIONS? FUTURE TOPICS OF INTEREST Visit www.gannons.co.uk for further information