Settlement Agreements
Most civil lawsuits are resolved by settlement agreements, which are considered binding contracts between the parties. As such, “[s]ettlement agreements are governed by the rules of contract interpretation.” ABC Liquors, Inc. v. Centimark Corp., 967 So. 2d 1053, 1056 (Fla. 5th DCA 2007) (citation omitted). “The creation of a contract requires that there be mutual assent to a certain and definite proposition.” Id.
“Where essential terms of an agreement remain open, and subject to future negotiation, there can be no enforceable contract.” ABC Liquors, Inc., 967 So. 2d at 1056 (quotation omitted). “However, what constitutes an essential term of a contract will vary widely according to the nature and complexity of each transaction and must be evaluated on a case specific basis.” Id. (citation omitted). “Nevertheless, an ‘agreement to agree’ is unenforceable as a matter of law.” Id. (citation omitted).
General Contract Principals
The first element of a valid contract requires an “offer.” An offer is a manifestation of an intent to be contractually bound upon acceptance by another party. Restatement (Second) of Contracts, § 24 (1981). The second element of a valid contract requires an “acceptance” of the offer. Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. Restatement (Second) of Contracts, § 50(1).
Unless the offer provides otherwise, an acceptance is effective when sent. Restatement (Second) of Contracts, § 63(a). The third element of a valid contract requires “consideration” to support the promises made by the parties. See Pick Kwik Food Stores, Inc. v. Tenser, 407 So. 2d 216, 218 (Fla. 2d DCA 1981) (“A binding contract requires consideration.”). Consideration requires a bargained exchange in which each party incurs a legal detriment. Restatement (Second) of Contracts, § 71.
Challenges to Settlement Agreements
There are a myriad of legal arguments that can made to challenge the enforceability of settlement agreements. The remainder of this article, however, discusses four specific challenges to settlement agreements and how the courts resolved those challenges.
Lack of Specificity
In ABC Liquors, Inc. v. Centimark Corp., 967 So. 2d 1053, 1057 (Fla. 5th DCA 2007), the party opposing a settlement agreement alleged that it was not specific enough to form a binding contract. The Court acknowledged, “[a]dmittedly, the settlement agreement created a framework to resolve the parties’ differences, rather than nailing down each and every detail.” Id. However, the Court observed:
[A]s the supreme court said … “even though all the details are not definitely fixed, an agreement may be binding if the parties agree on the essential terms and seriously understand and intend the agreement to be binding on them. A subsequent difference as to the construction of the contract does not affect the validity of the contract or indicate the minds of the parties did not meet with respect thereto.”
Id. (quotation omitted). On that basis, the Court concluded that the settlement agreement at issue was “sufficiently specific to be enforceable.” Id.
Preliminary Negotiations
In Warrior Creek Dev., Inc. v. Cummings, 56 So. 3d 915, 916 (Fla. 2d DCA 2011), the parties to the pending action, through their attorneys, reached a settlement agreement resolving all claims between them. “The essential and material terms of the settlement were set forth in a detailed e-mail sent by Mr. Cummings’ attorney to Warrior Creek and Mr. Knight’s attorney.” Id. “Their attorney agreed to the terms contained in the e-mail.” Id. “The terms of the agreement anticipated the preparation and execution of collateral documents.” Id.
“Although all essential and material terms of the settlement agreement were addressed in the e-mail, the attorneys thereafter agreed to draft a separate written settlement agreement to be included in the package of settlement documents.” Warrior Creek Dev., Inc., 56 So. 3d at 916. “When this settlement agreement was drafted, it added a provision for an award of attorney’s fees and costs that was not contained in the agreed-upon terms in the November e-mail.” Id. at 916–17.
A few days later, Warrior Creek’s “attorney sent an e-mail to Mr. Cummings’ attorney stating ‘[a]s Mr. Cummings has refused to sign the settlement papers, the deal is off.’” Warrior Creek Dev., Inc., 56 So. 3d at 917. “Warrior Creek and Mr. Knight took the position that the November e-mail was merely a preliminary negotiation and that the settlement agreement contained in the package of settlement documents constituted an offer, which was either rejected by Mr. Cummings or revoked by Warrior Creek and Mr. Knight prior to Mr. Cummings’ acceptance.” Id.
“The trial court disagreed.” Warrior Creek Dev., Inc., 56 So. 3d at 917. “It determined that the essential and material terms of the settlement were reflected in the November e-mail and concluded that Warrior Creek and Mr. Knight’s effort to revoke the settlement was thus ineffective because they had already agreed to the essential and material terms for settlement.” Id. On appeal, the Court held that “[t]he trial court correctly applied the law to the evidence in finding that the parties had agreed upon all of the essential and material terms for settlement and that those terms were reflected in the November e-mail.” Id.
Mirror Image Rule
In Suarez Trucking FL Corp. v. Souders, 350 So. 3d 38 (Fla. 2022), the Florida Supreme Court rejected a “mirror image” argument to escape a settlement agreement. There, the plaintiff made an offer of judgment to resolve a case pursuant to Fla. Stat. § 768.79. Id. at 41. The defendant filed a written notice accepting the offer of settlement made by the plaintiff. Id. On appeal, the Second District affirmed a trial court’s order denying a motion to enforce the settlement agreement, “holding that the written notice of acceptance was not sufficient to form a binding contract.” Id. at 40. However, the Supreme Court noted, “[t]he district court majority erroneously conflates acceptance with performance and errs in its understanding of what is required to manifest acceptance of an offer inviting a promissory acceptance.” Id. at 41.
Instead, the Court noted, the “notice of acceptance created a binding settlement contract by unequivocally and fully assenting to the terms of the offer. It is hard to imagine a form of acceptance that could be more clear or more effective.” Suarez Trucking FL Corp., 350 So. 3d at 42. “Avoiding this reality, the Second District invokes and misapplies ‘the strict common-law rule applicable to offers generally—the so-called ‘mirror image’ rule that generally requires the acceptance to be in every respect identical to the offer.’” Id. at 42 (quotation omitted). “The Second District denigrates Suarez Trucking’s acceptance as ineffectual ‘boilerplate’ that ‘lacked specificity,’ holding that under the mirror-image rule, Suarez Trucking could only manifest its acceptance of the offer by reciting back the terms of the offer.” Id.
Conversely, “[b]asic contract law has long established that ‘[i]n order to create a contract, it is essential that there should be a reciprocal assent’ to the contract terms.” Suarez Trucking FL Corp., 350 So. 3d at 42 (quotation omitted). “The ‘assent must be precisely [to] the same thing.’” Id. “That is, the acceptance must mirror the offer.” Id. “Consequently, if one assents to a certain thing and the other assents to it only with modifications … no agreement or contract arises therefrom.” Id. (quotation omitted). “There must therefore be an objective manifestation by both parties of assent to the same terms. This is a rule of consistency. It is not—as the Second District would have it—a rule of regurgitation.” Id. at 42–43.
The Court ultimately held, “the promise made by Suarez Trucking in the filed notice of acceptance was ‘made absolutely and unqualifiedly,’ and Suarez Trucking ‘agreed to make precisely the promise requested.’” Suarez Trucking FL Corp., 350 So. 3d at 43. “It was of no consequence that ‘the precise words of the requested promise’ were not repeated.” Id. “The filed acceptance constituted ‘a positive and unqualified assent to the proposal’ of settlement. That’s what the law requires for an acceptance to be effective.” Id.
My Attorney Settled without my Consent
Importantly, “[t]he mere employment of an attorney does not of itself give the attorney the implied or apparent authority to compromise his or her client’s cause of action.” 10 Fla. Jur. 2d Compromise, Accord, and Release § 26. “Also, an attorney’s belief that he or she has the authority to settle the client’s case does not, alone, establish such authority.” Id. “A client may give his or her attorney special or express authority to compromise his or her cause of action, but such authority must be clear and unequivocal.” Id.
Consequently, “[a] party seeking to compel enforcement of a settlement bears the burden of proving that an attorney has the clear and unequivocal authority to settle on the client’s behalf.” Sharick v. Se. Univ. of the Health Scis., Inc., 891 So. 2d 562, 565 (Fla. 3d DCA 2004). Florida courts have established the following rules applicable to resolving disputes where a client disavows settlement agreements accepted by their attorney:
(1) A party seeking judgment on the basis of compromise and settlement has the burden of establishing assent by the opposing party ….
(2) The mere employment of an attorney does not of itself give the attorney the implied or apparent authority to compromise his client’s cause of action ….
(3) An exception to the general rule is a situation in which the attorney is confronted with an emergency which requires prompt action to protect his client’s interest and consultation with the client is impossible ….
(4) A client may give his attorney special or express authority to compromise or settle his cause of action, but such authority must be clear and unequivocal ….
(5) An unauthorized compromise, executed by an attorney, unless subsequently ratified by his client, is of no effect and may be repudiated or ignored and treated as a nullity by the client ….
Ponce v. U-Haul Co. of Florida, 979 So. 2d 380, 382 (Fla. 4th DCA 2008) (quotation omitted).
In Ponce, 979 So. 2d at 383, the appellant appealed a trial court’s order finding an enforceable settlement agreement and the Court held “[b]ecause U–Haul failed to meet its burden to prove that Ginzberg had a clear and unequivocal grant of authority from the Ponces to file a proposal for settlement, we are required to reverse.” Similarly, in Sharick, 891 So. 2d at 565, the Court reversed an order enforcing a settlement where the trial court “did not resolve the [dispositive] authorization dispute … and … the record demonstrates no clear and unequivocal grant of authority to the attorney.”