Home -> Law Blog Directory -> Intellectual Property Law Blogs -> Business and Technology Law

Intellectual Property Law

: Business and Technology Law

Court Upholds E-mail Settlement Agreement

By Stephanie Robinson

The Massachusetts Appeals Court ruled on January 15 that when parties accept the terms of a settlement agreement via e-mail, the settlement agreement is enforceable. In the midst of a jury-waived trial, plaintiff Basis Technology Corporation and defendant Amazon.com, Incorporated appeared to agree to the terms of a settlement agreement. Basis Technology Corp. v. Amazon.com Inc., No. 06-P-1048 (Mass. App. Ct.). Basis' counsel sent Amazon's counsel an email setting forth six settlement terms to be later memorialized in a writing, after which Basis' counsel wrote, ?please contact me first thing tomorrow morning if this e-mail does not accurately summarize the settlement terms?.? Amazon's counsel responded with a one word reply: ?correct.? Both counsel reported in open court and on the record that a settlement had been reached without specifying the settlement terms. Amazon's counsel sent to Basis' counsel the next day a facsimile of the e-mailed terms. The parties later disagreed about a settlement term requiring Amazon to convert preferred stock to common stock and Basis sought to enforce the settlement agreement. Amazon opposed. The trial judge ruled that the e-mail constituted an agreement on all material terms and was not ambiguous. Amazon appealed on grounds 1) the trial court incorrectly ruled as a matter of law that the e-mail exchange could create a complete and unambiguous agreement and 2) the trial court incorrectly ruled as a matter of fact-finding that Amazon intended to be bound by the e-mail terms. The Appeals Court ruled that settlement terms do not become ambiguous simply because the parties develop different meanings of them. Genuine ambiguity requires language susceptible of more than one meaning so that reasonably intelligent persons would differ as to which meaning is the proper one. The court ruled that because Amazon's counsel responded to the e-mail with ?correct? that the essential business terms were resolved. Intent to subsequently memorialize terms in writing does not mean intent to create terms. The terms needed only to be recorded. The court determined that where parties agree to material terms, it may be inferred that a document executed by the parties serves as a polished memorandum of an already binding contract. Amazon?s most strenuously argued contention was that the settlement term requiring application of a formula for a stock conversion was too indefinite. The court ruled that the term described in the email incorporated by reference the ratio set forth in a previous stock purchase agreement and a previous amendment to Basis' certificate of incorporation agreed to by both parties. Because those provisions incorporated the conversion ratio and accompanying formula as constant elements of the Basis certificate of incorporation, they together provided an objective method for determining a variable contractual element. The court determined that Amazon had actual or chargeable knowledge of the formula in question when it agreed to the settlement terms. Amazon?s counsel should have rejected that settlement term if Amazon did not intend to be bound by it.

Full post as published by Business and Technology Law on January 28, 2008 (boomark / email).