Index of Content

Settlement Agreements
Hurst Stores & Interiors Ltd v ML Europe Property Ltd [2004]
EWCA Civ 490

The importance of vigilance when signing agreements has recently been highlighted in the courts. In April, the Court of Appeal considered a case in which a contractor had failed to note crucial clauses in a settlement agreement.

The Court heard that ML (Merrill Lynch) contracted Hurst to fit out toilets in its new HQ. The works were extensively altered and interim statements (over 500 in total) were issued detailing the variations; Hurst's project manager was required to signify the company's agreement to the valuation of these new instructions. After completion, Hurst claimed £6.5 million, including £2.5 million for the additional expense.

ML rejected the sum, relying on an interim statement signed by Hurst six months previously. Unlike all the other statements, this document stated that the amount payable under it was to be accepted in full and final settlement of all claims for the works up to that date. However, both the trial judge and Court of Appeal agreed with Hurst's argument that its project manger had been mistaken as to the true nature of the document. The Court also held that he had no authority to commit Hurst to an agreement that effectively wrote off large sums due to the company under the trade contract.

This decision establishes that the purpose of the settlement agreement should be clear and the authority of the signing parties must be obtained. Most importantly, the parties should also read the document before signing!

Clifford Chance, International Construction Newsletter
Summer 2004

Back to top