Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Friday, October 2, 2009

Settlement Agreement: Elements essential to enforceability

HOW DO COURTS DETERMINE WHETHER A SETTLEMENT AGREEMENT IS ENFORCEABLE?
 
The enforceability of a settlement agreement is determined in the same manner as any other written contract. Anderton v. Schindler, 154 S.W.3d 928, 932 (Tex. App.-Dallas 2005, no pet.). Whether an agreement is legally enforceable or binding is a question of law. Texaco, Inc. v. Penzoil Co., 729 S.W.2d 768, 814 (Tex. App.-Houston [1st Dist.] 1987, writ ref'd n.r.e.).
 
WHAT IS REQUIRED TO MAKE A SETTLEMENT AGREEMENT ENFORCEABLE?
 
In order for a court to enforce a contract, the parties must agree to the essential terms of the contract. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). An agreement is unenforceable if it is so indefinite that a court cannot fix the legal obligations and liabilities of the parties. Moore v. Dilworth, 179 S.W.2d 940, 942 (Tex. 1944).

WHAT ARE ESSENTIAL TERMS OF A SETTLEMENT?

 Our court has determined that essential terms for a settlement agreement are the amount of compensation and the liability to be released. Disney v. Gollan, 233 S.W.3d 591, 595 (Tex. App.-Dallas 2007, no pet.). See also Padilla v. LaFrance, 907 S.W.2d 454, 460-61 (Tex. 1995) (agreement was complete where terms included agreement to pay in exchange for settlement); CherCo Properties, Inc. v. Law, Snakard & Gambill, P.C., 985 S.W.2d 262, 266 (Tex. App.-Fort Worth 1999, no pet.) (holding a settlement agreement that includes the terms of payment, and a statement that the parties would execute releases, contained all material terms). When essential terms are open for future negotiation, there is not a binding contract. T.O. Stanley, 847 S.W.2d at 221.
 
SOURCE: 05-08-01042-CV (Dallas CoA) (9/29/09) (agreement lacked essential term because compensation under the agreement was not yet clear)