Non-Binding Agreements - David Frost v Wake Smith & Tofields Solicitors

When is failing to document a settlement at mediation negligent?

Clients rely upon their solicitors to document agreements in legally binding terms. If an agreement is reached and reduced to writing but turns out not to bind the parties, can the client claim against the solicitor for negligence?

The Court of Appeal decision in David Frost v Wake Smith & Tofields Solicitors [2013] EWCA Civ 1960 provides a cautionary reminder of why it is always preferable to document any terms agreed by clients in a legally binding agreement as soon as possible. If this is not possible, solicitors may owe a duty to explain the non-binding nature of the agreement to their client.

Pitfalls of a non-binding agreement

No deal despite a signed document - is the client unaware that he is not legally protected? Disagreement on whether the agreement is binding. What are "Heads of Terms" anyway - can one side try to escape the deal after it is done? Deal 'subject to contract' - how long and how expensive is it going to be to perfect the drafting? The unexpected point. Will an overlooked issue (for example, tax on damages) arise preventing the deal being done which could have been wrapped up at the time? The lost relief of settlement - it can be distracting and demoralising to go back to an issue you thought was resolved. Frost v Wake Smith

The case concerned two brothers who reached an agreement at mediation, David and Ron Frost, who had been in business together for about 20 years. Their business interests, which were primarily in property development and management, had become intertwined in a complex and opaque manner. Their relationship broke down and they became entangled in a long and acrimonious dispute over how to separate their interests.

Eventually the brothers sought legal representation and it was ultimately agreed that they should mediate their dispute. At the mediation, the brothers agreed on certain terms and David Frost's solicitor, Mr Serby, was left to reduce these to writing while the brothers went out separately for dinner. Upon their return, the brothers signed a document which set out what they had agreed in principle.

This was not, however, a legally binding agreement. It contained elements that were uncertain and which indicated that the agreement was yet to be finalised, such as undefined terms; no accurate description of relevant properties; failure to deal with the charges over those properties; and incomplete treatment of the tax...