Settlement agreements are an unfortunate breeding ground for litigation. Too often, parties in a dispute are so keen to “put things behind them” that the terms of settlement are not documented, or poorly so. Important details that get over-looked or are perceived as just too hard to nail down can result in a secondary dispute about who needs to do what, when, and at whose cost.
In a recent example, two wine-makers party to a 2010 High Court proceeding ended up in the District Court in 2016 in a fight over the settlement terms. Te Mata Estate Winery Ltd and Ata Mara Ltd (previously Te Mara Estate Ltd) reached an agreement in 2010 about the use of “Te Mara”. Te Mata said use of Te Mara infringed its intellectual property rights. The settlement agreement included requirements that Ata Mara change its branding and sell-down stock. Unfortunately, there was no time-period specified for completion of those steps.
It was not until mid-2013 that Te Mata reminded Ata Mara of its obligations under the terms of the settlement. In a missed opportunity, Te Mata also didn’t state when Ata Mara should complete the steps by. Te Mata could have taken the opportunity to say what it thought a “reasonable time” for completion would be. The law provides that in the absence of a specified time for a contractual obligation, a party has a “reasonable time” to do it.
In response Ata Mara took steps to comply and asked for payment of the settlement amount to be made to it. Instead, Te Mata cancelled the settlement agreement – saying that Ata Mara had been in breach for so long it “had no intention of complying”. The parties had to go to court – again (Ata Mara Estate Ltd v Te Mata Estate Winery Ltd  NZDC 11956).
A better drafted settlement agreement, which included clear timeframes for compliance, would likely have avoided the need for anything more than a few emails to get things sorted.
A clear and detailed settlement agreement is what stands between the parties and another dispute. It is always worth the extra time, cost and emotional effort.