October 3, 2007

New Case Law: A promise is a promise

Last month, the Oregon Court of Appeals ruled an agreement to settle a case was binding under a very unusual set of circumstances.

John and Diane Baldwin divorced in 1993. As part of the divorce, the court divided John’s PERS account. The next year, John married Karen. In 2005, John died, and Karen became his estate’s personal representative.

Diane and Karen disagreed about how to handle the marital portion of John’s PERS benefits. Karen asked the court that dissolved John and Diane’s marriage to clarify its 1993 order. When the court declined to clarify, Diane was left with 100% of John’s marital portion of his PERS benefits.

Karen filed a notice of appeal from the trial court’s order. After a settlement conference, Diane and Karen’s attorneys worked via email for months towards a resolution of the case. Finally, Karen hired new counsel and decided to go ahead with the appeal.

Diane moved the court to dismiss Karen’s appeal, because Diane said the women had reached a settlement agreement that should be enforced. Karen disagreed.

The court sided with Diane. It wrote that a settlement agreement is a contract and is governed by contract law. Baldwin and Baldwin, ____ Or App ____ (A130180). The issue of whether or not a contract exists is an issue for the court to decide. Id. The court wrote:

As often stated, Oregon subscribes to an objective theory of contracts, which means that whether the parties entered into a contract does not depend on the parties having the same subjective understanding of the agreement. Rather, it depends on whether the parties agreed to the same express terms of the contract. Newton/Boldt v. Newton, 192 Or App 386, 392, 86 P3d 49, rev den, 337 Or 84 (2004).

In this case, the court concluded the parties had agreed to the same express terms, and that the parties had haggled over some of the details was immaterial to the actual agreement. The email exchanged between Diane and Karen’s attorneys is what made the contract. Baldwin, supra. The court wrote that a different result would have been reached if Diane and Karen had disagreed about the primary issues at stake. However, because the material issues had been agreed upon, the women had formed a settlement contract. Id.

The moral of the story? This case shows just how important it is for a client to know what his or her attorney is doing on his or her behalf. It also demonstrates for attorneys that even an informal discussion via email can give rise to a binding settlement agreement for their clients.