By Tim Faith, Esq.

Holding

The preliminary agreement resolving aspects of the caveat proceeding was an enforceable agreement because the parties expressed definite agreement on all necessary terms, and signed the document, indicating mutual assent of the parties as to resolution of the issues described in the handwritten document.

Opinion by: J. Shaw

Facts

Marlin Ray Lawson died testate on May 10, 2019. On May 29, 2019, his surviving wife filed a Petition for Estate Administration of the decedent’s will, which provided for his wife and their grandchildren, but not the three surviving children. A caveat proceeding was filed by one of the children challenging the will. The case was transferred to the circuit court, which led to a mediation of the dispute between the parties. At the conclusion of the mediation, the parties executed a handwritten document that outlined a set of “proposed terms” to resolve the Estate.

Subsequently, Ms. Fike’s attorney, who had brought the caveat proceeding, received an email from the attorney of decedent’s wife and now appointed Personal Representative, which stated that the “current terms of the settlement agreement were unacceptable to her.” A motion to enforce the settlement agreement was filed, and following a hearing, was granted by the circuit court.

Analysis

Settlement agreements are enforceable like other contracts under Maryland law, and are subject to the same legal rules of contract interpretation and enforcement. Generally, Maryland courts interpret contracts through the objective theory of contract interpretation to effectuate the intent of the parties entering into that agreement. “A contract requires a manifestation of mutual assent” whereby the parties intend to be bound to terms sufficiently definite to be enforced by a court.

Decedent’s wife challenged the enforceability of the handwritten mediation agreement on the grounds that it was a memo of preliminary negotiations rather than a final, enforceable agreement because of the specific language used in the document and because the preliminary agreement did not resolve all of the parties’ outstanding issues concerning the Estate. The Court considered whether this preliminary agreement was itself binding based on which category best characterizes it, using the categories described in Corbin on Contracts § 2.9, and cited by the Supreme Court of Maryland in Cochran v. Norkunas, 398 Md. 1, 13 (2007):

(1) At one extreme, the parties may say specifically that they intend not to be bound until the formal writing is executed, or one of the parties has announced to the other such an intention.

(2) Next, there are cases in which they clearly point out one or more specific matters on which they must yet agree before negotiations are concluded.

(3) There are many cases in which the parties express definite agreement on all necessary terms, and say nothing as to other relevant matters that are not essential, but that other people often include in similar contracts.

(4) At the opposite extreme are cases like those of the third class, with the addition that the parties expressly state that they intend their present expressions to be a binding agreement or contract; such an express statement should be conclusive on the question of their “intention.”

The Supreme Court found in Cochran that the parties did not intend to be bound by the preliminary agreement, but instead by the standard form Maryland Realtors Contract, and therefore the preliminary agreement was unenforceable. In a subsequent case of Falls Garden Condominium v. Falls Homeowners, the Supreme Court again confronted a preliminary agreement with a formal agreement to follow, but found that the preliminary agreement was binding because it was “inclusive and definite as to all material terms.” 441 Md. 290, 308 (2015). The Court also discussed a settlement agreement in active litigation in another matter, where the parties had, one day prior to trial, reached an agreement which was placed on the record by the attorneys in the case, and which was to be followed by a written document. 4900 Park Heights Ave. LLC v. Cromwell Retail 1 LLC, 246 Md. App. 1 (2020). The Court affirmed enforcement of the 4900 Park Heights agreement, “finding that the parties intended to be bound by the agreement, specifically referencing the court proceedings where the agreement was placed on the record, the recitation of the material terms of the settlement, and counsels’ confirmation regarding the agreement.”

The Court in the present case affirmed enforcement of the settlement agreement between Appellant and Appellee on the trial court’s finding that the handwritten document contained all the necessary terms to express the intentions of the parties to be bound, the document contained definitive language, and the parties signed the agreement. As a result, the Court affirmed the circuit court’s order enforcing the settlement agreement.

Full opinion HERE | MSBA Business Law Section Blog HERE

Tim Faith is a practicing business law and estates planning attorney, and also an associate professor at The Community College of Baltimore County, where he teaches business law, legal writing, and torts. Tim also serves as the chair of the Maryland Business Law Developments blog, a service of the Business Law Section of the Maryland State Bar Association.