Settlement did not require formal contract

Thanks to Michael Reed, Employment Legal Officer at the Free Representation Unit for preparing this case summary

Is an exchange of letters, without a detailed agreement, sufficient to settle a claim? It was in Newbury v Sun Microsystems, concluded the High Court.

Sun's solicitors wrote to Mr Newbury, offering to compromise his claim for £601,464.98, paid within 14 days. Mr Newbury's solicitors replied, accepting these terms, but that they would 'forward a draft agreement for your approval'.

The parties attempts to agree that draft floundered.

Mr Newbury then argued that a binding agreement had already been reached.

Analysing the wording of the letters, Lewis J agreed. The offer was detailed enough to be capable of acceptance and it had been accepted.

This case highlights the importance of clarity in the closing phase of negotiation. Parties wishing to agree a figure, but negotiate on other matters, must be careful. As Lewis J commented, the phrase 'Subject to contract' may be signficant.