Sealing the deal

What happens when you don’t “paper” a deal? Sometimes, the deal disappears and the parties are stuck continuing with litigation or trying to get a court to force the other side to abide by the terms that they claim were agreed upon.

This is why I always strongly recommend that if the parties reach a settlement at mediation, a proper agreement be executed setting out all terms and conditions.

As a young lawyer, that was always drilled into my head: do not leave without signed settlement documents (unless there was no settlement, of course). And I do recall a few tense situations where, for one reason or another, a party could not sign the settlement documents there and then, and everyone waited on pins and needles for the executed documents to arrive in the following days, worrying that all of our efforts to negotiate a good settlement had been in vain.

As my career evolved as counsel, I often warned clients of this and ensured that they were committed to signing before leaving. I made sure that the person who had authority to sign was either present or readily available. And now that I act as a mediator, I do my best to ensure that if we get a deal done, we do not leave anything to chance by concluding without a signed agreement.

In the days of video mediations, I sometimes hear people express concern or frustration that it’s “impossible” to get everyone to sign. That is simply not true and a poor excuse. There are many great tools available to have everyone confirm their acceptance of an agreement, including Docusign and Hellosign. And if that fails, we can use the “old school” method of sending the document via email, having it printed, signed, scanned, and returned.

This just comes down to preparation: even if you did not prepare for this before mediation, there is more than enough down-time during mediation to prepare for execution of minutes.

More commonly, the reason for not signing is either that it has been a very long day and everyone is exhausted, that the person with authority to sign is unavailable, or that someone has to approve the settlement.

With respect to the first reason above, I get it; sometimes mediations go through the day and into the night. Everyone wants to get home, but the only thing worse than spending an inordinate amount of time in mediation is spending an inordinate amount of time in mediation thinking you finally reached an agreement, and then seeing it disappear.

With respect to the other two reasons above, that is why it is always best to have the decision-maker in the room (physical or virtual). A deal should not be held up because someone who is unavailable has to approve it; if that is the case, there really is no deal. And if the deal has been confirmed, then the person there should be able to sign or reach someone that can.

Ontario case highlights challenges

A recent example of a deal gone sideways can be found in the Ontario case of Peres v Moneta Porcupine Mines. In that case, the parties documented the agreement reached at mediation through emails setting out the highlights, instead of executing fulsome minutes of settlement. Among other things, the agreement included a term that the plaintiff would be issued stock options, ”subject to board approval acting reasonably”.

Whether I am the mediator or counsel, that type of language always makes me nervous. What happened next was that the board of directors decided that the deal as a whole was overly generous, and they declined  to approve it.

The parties then found themselves in court, and Justice Andrew Pinto had to determine whether there was an enforceable agreement. The defendant took the position that, at best, there was an “agreement to agree”, which is no agreement at all. Interestingly, despite an email from plaintiff’s counsel which seemed to support that position, Pinto found that there was enough there to form an agreement:

“I note that, in plaintiff counsel's 5:55 p.m. email, he wrote ‘I appreciate that there is a lot more to add to a full set of Minutes. This is an agreement to agree subject to Minutes and Release that are acceptable to both parties.’ Still, when I carefully examine defendant counsel's 6:09 p.m. email, I find little merit in the defendant's argument that there was no ‘meeting of the minds’ on many of the essential terms. Instead, I find that the parties agreed on the essential terms, but some further work was required in terms of writing up the details.”

He concluded that the clause regarding stock options was an essential pillar of the deal, and that failure on that point would mean the whole deal would fail, but he found that there was no evidence that the board had a reasonable basis for refusing to grant the stock options. As a result, he concluded that a deal had been reached and issued an order to enforce it.

So in this case, the plaintiff was fortunate and the deal was upheld. That said, they had to spend time and money on a motion to enforce it, with all the uncertainty that any court proceeding involves. It’s far better to have clear terms of settlement that are signed by the parties. Rarely will there be a good reason not to do so if an agreement has been reached. Otherwise, there may be an agreement to agree, but that is usually not worth much.