Navigating turbulent waters: Oral settlement agreements are generally enforceable

Oral settlement agreements are enforceable as a general legal proposition.

We addressed in this blog entry the relatively absolute principle that the statute of frauds requires agreements relating to the purchase and sale of real estate be in writing and signed by the party who one intends to sue.  But when it comes to resolving disputes, especially litigation, that rule is thrown out the window.

This sounds like some legal double-speak, but even though the sale of real estate requires signature, the settlement of a dispute regarding the purchase and sale of real estate does not.  The statute of frauds does not apply to settlement agreements.

So, when parties are involved in litigation, and settlement discussions ensue, all things said and agreed to in oral conversations are enforceable as a matter of contract.  Further, this rule applies when matters are pre-litigation.

Many times when my client is involved in a dispute, the other party asks whether they can have settlement discussions alone, without the attorneys involved.  I like the idea, as it can permit the parties to overcome obstacles to settlement that the attorneys cannot.  But the problems with this approach, as I explain to my clients, are twofold: (i) first what the client may say that hurts his case or agree to that could resolve the case on terms he does not agree and (ii) even if my client does not say anything precipitous, the other party could claim he did.  And then we have an argument about proof of what was or was not said in that private meeting.

As a result, I frequently require a written agreement signed by both parties before such a meeting promising that (i) no agreement will be binding unless and until it is memorialized in writing and signed by both parties, and (ii) anything said in such a meeting with not be used or referenced in any way in the litigation proper.