In Baltimore Wharf SLP v Ballymore Properties Limited & WSP UK Limited, the Technology and Construction Court held that terms agreed in principle by email were not binding on the parties, since a ‘subject to contract’ reservation remained in place pending execution of a formal Settlement Agreement, and had not been removed by implication.
What happened?
Baltimore brought a claim against Ballymore after a nursery roof collapsed in London. Ballymore then joined WSP in the proceedings. The proceedings were stayed while the parties tried to settle, a process that involved various exchanges on a ‘subject to contract’ basis; an email confirming proposed amendments were agreed; and provision of bank details and a draft settlement agreement which Ballymore and WSP signed but Baltimore did not. After the stay expired, Ballymore and WSP sought to strike out Baltimore’s claim on the basis that the underlying dispute had been settled.
What did the TCC decide?
- Simply agreeing the terms of a settlement in principle is not enough, by itself, to create a binding deal.
- Once talks are marked ‘subject to contract’, that protection stays in place unless the parties expressly remove it, or their conduct makes that intention obvious. That is a high bar.
- Here, the ‘subject to contract’ protection was not removed by implication. The surrounding conduct still pointed to a deal that was being finalised rather than one that was already binding.
What can we learn from this?
This case is a useful reminder that “subject to contract” really does mean the deal is not finished yet, notwithstanding there may be correspondence suggesting everything is agreed. To make a settlement legally binding, the ‘subject to contract’ reservation needs to be lifted and the agreement properly signed off.
Need advice on how to negotiate and draft a legally binding settlement agreement? Don’t hesitate to get in touch. Our team is on hand to offer clear and commercial legal support.
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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.
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