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
