The assumption of entering into a settlement agreement is that all parties to the agreement will abide by the terms of the settlement. But what happens when one party chooses to change their mind after an agreement has been reached?

Under Rule 49.09 of the Rules of Civil Procedure, a party may bring a motion to enforce the terms of an accepted offer to settle. The two-part test to determine this was set out in Bank of Montreal v Ismail by the Court of Appeal. The moving party must persuade the motion judge that:

1. An agreement to settle was reached; and
2. On all of the evidence, the settlement should be enforced.

In determining the first part of the test, a court must decide whether the parties have a mutual intention to create a legally binding contract and whether they have reached an agreement on all the essential terms of the settlement.

In the case of Campbell v Gautreau et al, 2022 ONSC 3416, the facts were unambiguous and clear that there had been an agreement to settle. The parties had verbally agreed to the amount of the settlement at mediation. After mediation, counsel for the defendants sent the applicant a detailed email outlining the terms of the settlement and a draft release for signature. The applicant returned a signed release and wrote back saying she agreed. It was not until a consent form and draft order were sent to the applicant that she changed her mind and refused to sign the necessary documents.

The court found that the essential terms of the settlement were reached in the email counsel had sent. Additionally, the applicant had not provided any evidence to support her claim that she was under duress while signing the settlement agreement.

The court reiterated the fact that if an agreement to settle has been reached, the agreement should be enforced providing there is:

1. No genuine mistake as to the terms of the settlement;
2. There is no misunderstanding with respect to certain fundamental facts;
3. There was no duress while signing; and
4. The agreement is not illegal.

The court found that the applicant’s change of heart after agreeing to settle was not a justification to refuse to enforce the parties’ agreement. Therefore, the motion was granted to enforce the settlement agreement.

Parties accepting an offer to settle or entering into settlement agreements must be certain that they are agreeable to the terms decided by both parties. In these situations, there is no room to change your mind or back out of a deal unless you can prove there was a mistake in the terms, a misunderstanding of the facts or a party was under duress while signing. Otherwise, the court will enforce the settlement and award costs against the party refusing to abide by the terms.

Thank you for reading.