January 17, 2019

Settlement of a dispute by oral agreement

Settlement of a dispute by oral agreement
Doe v. Kogut, USCA, Second Circuit, Docket #17-1479 [Summary Order]
[N.B.Second Circuit rulings by summary order do not have precedential effect.]

The parties in this action reached a settlement at a conference with a magistrate judge. After reciting the terms of the settlement on the record, the federal magistrate judge asked both parties if they understood and accepted the terms of the settlement and understood that acceptance constituted an oral contract. Both Doe and Kogut affirmed these statements.

Doe, however, subsequently repudiated the settlement, stating that the oral contract was not binding and she had been under duress.

Kogut, on the other hand, moved to enforce the settlement agreement and the court granted Kogut’s motion, reasoning that the oral agreement was binding and that Doe was not under duress at the time of the settlement conference. The Circuit Court sustained this ruling, explaining that “[a] settlement agreement is a contract that is interpreted according to general principles of contract law” and need not be reduced to writing if it is entered into voluntarily on the record in open court.  

In order to determine if the parties intended to be bound by an oral contract, the courts consider four elements:

[1] The absence of a writing;

[2] Whether there has been partial performance of the contract;

[3] Whether all of the terms of the alleged contract have been agreed upon; and

[4] Whether the agreement at issue is the type of contract that is usually committed to writing.

In this appeal the Circuit Court found that [a] the parties did not expressly reserve their rights not to be bound by the oral contract nor did either party object to the magistrate judge's statement of the terms of the settlement; and [b] both Doe and Kogut affirmed that they understood they would be bound by the oral agreement.

Noting that the parties “agreed that the formal settlement documents [would] incorporate the . . . [oral] terms and conditions,” the Circuit Court commented that the magistrate judge expressly stated that any later writing would be merely a memorialization of the material terms discussed at the conference and neither party objected. This factor, said the court, favors enforcement of the contract.

The second factor - partial performance - was affected Doe’s change in counsel. Doe's new attorney subsequently advised the court that he had been fired by Doe and ultimately a third attorney advised the court that he was now Doe’s new attorney. Thus, said the Circuit Court, the fact that Kogut did not ultimately draft a written version of the settlement or tender the agreed upon amount of the agreed upon payment to Doe "does not necessarily show that the parties intended not to be bound by the oral terms," opining that "[a]t best for Doe, this factor is neutral as Kogut’s ability to perform his end of the settlement was impaired as a result of Doe's actions.

The Circuit Court of Appeals found that the district court properly concluded that there were no open material terms as the agreement, as outlined by the magistrate judge, covered monetary compensation, included a mutual non-disparagement clause, and required Doe to withdraw her "family court petition" by a specified date. When asked by the magistrate judge, Doe’s attorney confirmed that no material terms were omitted. Indeed the Circuit Court's ruling states that "the parties considered whether the intervention of [an extra mural element] would affect any of the terms of the agreement and concluded that Doe would be bound [only] as to actions within her control." The court explained that Doe inability to withdraw her petition "does not bear on whether the parties settled all of the terms, but rather on her ability to perform her obligations.'

Turning to the fourth factor, the Circuit Court opined that “[s]ettlements of any claim are generally required to be in writing or, at a minimum, made on the record in open court [and] [t]hat is precisely what happened here -- the parties settled their dispute on the record before the magistrate judge." In the words of the Circuit Court, "... the parties’ settlement was not particularly complex -- Doe released her claims against Kogut and agreed to halt, to the extent  possible, proceedings in criminal and family court in exchange for a monetary payment and a mutual agreed upon non-disparagement agreement. Thus this factor favors enforcement of the oral settlement of the matter.

Because the parties did not reserve their rights not to be bound by the oral settlement, no material term was left open for further negotiation, and as the parties had reached their agreement on the record in open court, three of the four Winston factors favor enforcement of the oral settlement agreement.** The remaining factor was deemed neutral, without impact on any of the material terms of the settlement. 

As to Doe's claim of duress, although a settlement contract or agreement, like any other, may be attacked on the grounds that it was procured by fraud, duress or other unlawful means, Doe offered no evidence supporting her contention she agreed to the terms of the settlement under duress. Further, Doe did not offer any evidence of her attorney’s alleged lack of preparedness that “preclude[ed] the exercise of [her] free will,” and thus the court found this argument insufficient to show duress.

The Circuit Court of appeals held that the oral settlement was valid and the magistrate judge did not err by enforcing the agreement.

* Although this case involved litigating the oral settlement of a marital dispute, it is instructive with respect to the elements that would be considered by courts in resolving disputes involving an oral settlement of a contract grievance, a disciplinary action, a collective bargaining dispute and similar administrative or quasi-judicial proceedings. 

** Winston v. Mediafare Entm’t Corp., 777 F.2d 78

The decision is posted on the Internet at:


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