Cherry picking settlement terms not permitted

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Evergreen Timber Frames v Mr N K Harrington

In settlement negotiations there may be offers made in meetings and counteroffers made in response. The issue in the case of Evergreen Timber Frames v Mr N K Harrington was whether an employee who is made an offer of a gift as part of the settlement negotiations can accept that gift whilst still continuing to negotiate for improvements to other parts of the settlement package.

Mr Harringtom accepted a gift whilst still attempting to negotiate settlement terms

Mr Harrington, a manager, had been told that his role was at risk of redundancy. Attempts were made to reach a settlement. He was informed that his redundancy package would include his company car which he could keep as a gift. Mr Harringtom accepted the offer but said that he also wanted to be able to keep his company computer and wanted an assurance he would still receive his bonus. The employer did not agree his further requests and told him that he would not be entitled to keep the car.

Mr Harrington’s claim for breach of contract was dismissed

Mr Harrington’s claim for breach of contract in respect of the gift of the car was initially successful as he was awarded damages to the value of the car in the Tribunal. However, on appeal that decision was held to be wrong as one party in the negotiations is not entitled to accept part of the severance offer, whilst seeking to improve on other parts. The offer of the car was not a freestanding gift but a proposal made as part of wider termination package.

Key takeaway points

In practice it will be important to ensure that negotiations are conducted “without prejudice and subject to contract” to ensure that only the contractual terms of the signed settlement agreement can be seen as final. The risk is that, where negotiations are not stated to be subject to contract, a party may seek to allege that an earlier offer has contractual effect if it can be separated from the wider negotiation process.

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