Adjudication Matters ' February 2021

• Published date: 03 February 2021
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Debt Capital Markets, Financial Services, Contracts and Commercial Law
• Law Firm: Walker Morris
• Author: Carly Thorpe and Seumas Cram

Unsettled Business: is your settlement offer "subject to contract"?

In Aqua Leisure International Limited v Benchmark Leisure Limited the TCC determined that a settlement agreement which is expressed to be 'subject to contract' will only be binding when executed by the parties.

Background

Aqua Leisure International Limited (Aqua) was appointed by Benchmark Leisure Limited (Benchmark) in relation to the development of Alpamare waterpark in Scarborough, under a JCT Design and Build Contract in July 2015. After practical completion had been achieved, Aqua referred a dispute in respect of interim payment to adjudication, and obtained an adjudication award in its favour (the Adjudication Award). The Adjudication Award included payment of Aqua's legal costs under the Late Payment of Commercial Debts (Interest) Act 1998.

Following receipt of the Adjudicator's decision, the parties entered into settlement negotiations. On 31 August 2017 Aqua proposed that Benchmark make payment of '217,998 plus VAT, to be paid in instalments in accordance with a schedule of payments and that as part of this settlement a Guarantor was to guarantee the sum of '110,000. Aqua's settlement offer was expressed to be 'without prejudice and subject to contract'.

The following day, Benchmark responded to Aqua with an email which simply read "agreed". Aqua replied confirming that its lawyers would draft the settlement agreement and the guarantee wording. On 13 December 2017 Aqua sent a "deed of settlement and payment guarantee" to Benchmark for "review and completion". The parties to the deed were Aqua, Benchmark and the Guarantor.

Benchmark made payment to Aqua in accordance with the schedule in Aqua's settlement offer, but Benchmark failed to return a signed written copy of the settlement deed. Similarly, the Guarantor failed to return a signed copy of either the settlement deed, or the guarantee. Aqua requested that Benchmark provide the signed agreement on 6 different occasions, without success. On 11 May 2018 Benchmark wrote to Aqua explaining that the Guarantor would not be providing a guarantee as anticipated under the settlement offer.

Aqua then sought to enforce the Adjudication Award against Benchmark.

The Dispute

Aqua drew attention to the fact that the settlement offer put to Benchmark on 31 August 2017 was specifically expressed to be "subject to contract". Although Benchmark communicated its acceptance of the settlement offer to Aqua on 1 September 2017, Aqua argued that this...