NYLJ “Lack of Agreement on the Term ‘Implicit’ Insufficient To Preclude Enforcement”

By Thomas E.L. Dewey

When parties to a litigation negotiate a settlement agreement, they often agree on certain core terms before others, including the scope of the parties’ releases and the amount of any monetary compensation. And, if parties have not yet memorialized their settlement in a fully executed agreement, the parties’ consensus on these terms bears on the enforceability of any preliminary agreement.

Under the four-part test established by the U.S. Court of Appeals for the Second Circuit in Winston v. Mediafare Entertainment Corp., one of the elements determining enforceability of a purported settlement agreement not reduced to a formal, executed document is “whether all of the terms of the alleged contract have been agreed upon.” 777 F.2d 78, 80 (2d Cir. 1985).

However, as Garmashov v. United States Parachute Association, Inc. shows, parties can disagree on whether certain unresolved items in the negotiations were material terms requiring agreement before the purported settlement is deemed enforceable. No. 21-cv-4917 (JGK), 2022 WL 17342390 (S.D.N.Y. Nov. 29, 2022). Garmashov is a reminder to practitioners and clients alike that, if a party’s agreement to settle is contingent on a yet-to-be resolved settlement term, that position must be communicated explicitly and frequently.