Rory Spillman and Aimée Mullan published in Thomson Reuters Practical Law Magazine

Rory and Aimée's article was published in Thomson Reuters Practical Law, 29 September 2026, here.

Settlement agreements are one of the most important tools available to parties to narrow or compromise a dispute and can become complex, particularly in large commercial, multi-party and cross-border litigation. However, given their nature, they are often negotiated under time, procedural and sometimes financial pressure.

Parties find themselves having to negotiate and draft settlement terms while at the same time continuing to focus on the underlying litigation and the relevant procedural steps, including trial preparations, which can often take up significant amounts of time and resource. As a result, unless sufficient attention is given to the settlement terms and overall settlement mechanics, as well as related practical steps, parties can find themselves involved in satellite disputes, which can be every bit as costly and protracted as the dispute that it was designed to resolve.

This article examines some recent authorities and provides a practitioner’s guide to drafting settlement agreements that aim to achieve genuine finality.

RECENT CASES

In the past eighteen months, the English courts have delivered a series of decisions addressing the construction, scope and effect of settlement agreements. In chronological order, these are:

• Riley v Aidiniantz and another, where the High Court considered whether a Tomlin order barred a subsequent claim between the same parties in regard to the shares of the defendant ([2025] EWHC 3222 (Ch)).
• Petroleum Exploration (PVT) Ltd v Frontier Holdings Ltd, where the High Court addressed the presumption that a dispute resolution clause within a settlement agreement supersedes antecedent provisions ([2026] EWHC 56 (Comm)).
• Baltimore Wharf SLP v Ballymore Properties Ltd and another, where the High Court emphasised that if a party wishes its agreement to be final, it must make sure that terms such as "subject to contract" have been expressly removed, otherwise it can communicate that no binding settlement agreement will come into effect until it is executed ([2026] EWHC 312 (TCC); www.practicallaw.com/w-050-0499).
• Visa Inc v Luxottica Retail UK Ltd, where the High Court considered whether a settlement encompassed the claims of a company that joined the settling party’s corporate group only after the agreement was executed ([2026] EWHC 615 (Comm)).
• Lish v Northern Block Ltd and another, where the Court of Appeal was required to determine whether a Part 36 acceptance compromised subsequent claims brought by the same claimant ([2026] EWCA Civ 497).

Going further back, in BCCI v Ali, Lord Bingham stated that "in the absence of clear language, the court will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware” ([2001] UKHL 8). Nonetheless, finality is earned through precise drafting anchored in the circumstances known to the parties at the time, and not necessarily through all-encompassing generalities inserted as a precaution.

CORE DRAFTING ISSUES

It is vital to pay close attention to some key drafting points in order to ensure that the settlement agreement achieves its intended aims.

Parties

Identifying the parties to a settlement agreement should be a relatively straightforward process. However, in practice, disputes regularly arise where one party contends that the settlement extends to entities beyond those expressly named, whether as affiliates within a corporate group, successors in title, or third-party beneficiaries. Luxottica provides a salutary illustration of who may become bound by a settlement, even though it is not a party to it.

Luxottica Retail UK Ltd had settled multilateral interchange fee (MIF) claims against Visa Inc under a settlement agreement that released claims by Luxottica and its associated companies. Six months later, GrandVision NV was acquired and joined the Luxottica corporate group. Visa contended that the settlement also compromised GrandVision’s separate claims against Visa by virtue of the associated company definition and associated express language within the settlement agreement. Luxottica argued that the release was limited to entities within the group at the time of execution, or to entities whose claims were related to the settled business.

Recital D of the settlement agreement clarified which parties had an interest in the claim; this was considered alongside:

• The definition of associated companies, which included past, present or future associated companies.
• A comprehensive definition of a MIF-related claim, which also included "past, present or future" claims.
• The operative provisions; that is:
  • undertakings not to initiate, pursue, commence or continue any claim, and not to assign or transfer any settled claim (clause 7.1); and
  • an indemnity in the event of breach (clause 7.5).

The High Court upheld Visa’s position. The court acknowledged the importance of context but concluded that "[s]killed drafters choose deliberately" and that "the decision to define a category, rather than simply express an objective, should be respected". When reading the settlement agreement as a whole, Recital D and clauses 7.1 and 7.5 could not be impliedly limited. Taken together, these provisions supported Visa's argument in the court’s mind. Notably, the inclusion of the future proofing language was found not to be "sharp practice" (see "Sharp practice doctrine" below).

Practitioners should carefully consider the scope of any categorical definition, particularly where a corporate group is likely to expand through acquisition, reorganisation or merger. Where possible, it is prudent to clarify whether future group members are intended to benefit from the release and, where they are not, to include express temporal or relational limitations. As Luxottica demonstrates, the court will not supply a limitation that the parties did not negotiate.

Scope

The scope of the release determines what claims are compromised, what rights survive and whether the settlement achieves its intended purpose of finality. Lish provides a reminder that the scope of a settlement is determined by what the parties actually agreed, not by what one party subsequently wishes that they had agreed.

Mrs Lish, a typeface designer, settled intellectual property proceedings against Northern Block Ltd by accepting a Part 36 offer. She subsequently issued fresh proceedings claiming unpaid royalties and further infringement claims. At first instance, both claims were struck out as an abuse of process ([2025] EWHC 2172 (Ch)).

On appeal, however, the Court of Appeal drew a careful distinction between these two categories of claim. The appeal in relation to the unpaid royalties' claim was allowed as it was a genuinely distinct cause of action that had not been pleaded, was not the subject of the Part 36 offer and was not compromised by the settlement. However, the infringement claims were struck out as Mrs Lish had pragmatically decided not to include them at the time of the original proceedings, she had failed to alert the defendants to those additional claims before settlement, and the defendants had no reason to suppose that they were not settling all of Mrs Lish’s copyright claims.

The court found that the onus lay on her to make clear any intention to preserve those claims. Therefore, her failure to do so, followed by the subsequent pursuit of those claims, amounted to an abuse of process (see "Abuse of process" below).

The court concluded that if a party wishes the settlement to encompass a completely unpleaded cause of action or categories of claim, it must raise the point expressly before acceptance. A party that fails to articulate its requirements during the negotiation will not be rescued by the court afterwards.

The scope of a settlement was similarly considered in Riley. Ms Riley brought a claim under section 423 of the Insolvency Act 1986 seeking to set aside the defendant's transfers of shares to his wife, alleging that these were transactions at an undervalue designed to put the shares beyond the reach of creditors to whom the defendant owed substantial unpaid costs. The defendant sought to strike out the claim on the basis that it was barred by an earlier settlement agreement. The High Court held that although the settlement agreement included provisions regarding the ownership of the shares, the terms of the agreement did not bar claims of a nature not contemplated at the time of settlement.

Conditionality and subject to contract

A separate but related issue concerns the circumstances in which an agreement becomes binding. In Baltimore Wharf, the parties had negotiated a settlement under a “subject to contract” heading. The claimant's solicitor subsequently confirmed that terms had been “agreed”, but the settlement agreement remained unsigned. The question was whether a binding contract had been formed. The High Court determined that it had not.

Applying the principles from Joanne Properties Ltd v Moneything Capital Ltd, once negotiations begin under a “subject to contract” umbrella, that conditionality remains in place unless all parties expressly agree that it has been removed and that it would be "really hopeless for one side or the other to say that a contract came into existence because the parties became of one mind notwithstanding that no formal contracts had been exchanged" ([2020] EWCA Civ 1541). Therefore, agreeing on the wording of a settlement does not, of itself, create a binding agreement without a clear and unequivocal removal of the “subject to contract” label.

For practitioners, there are two lessons. Firstly, parties that wish to preserve contractual freedom pending formal execution should ensure that the “subject to contract” label is clearly and consistently applied throughout negotiations. Secondly, while the court retains discretion to find that the parties’ conduct has expunged the “subject to contract” umbrella, this remains a high bar. Prudent parties that consider that terms have been agreed should obtain an express, documented removal of the conditionality, ideally in writing from all parties, rather than relying on ambiguous confirmation that terms are “agreed” (see box "Causes of action audit").

Payment

A payment clause within a settlement agreement must address not only the quantum and timing of payment but also the consequences of default, the allocation of fiscal responsibility and the protection of the payee against contingent liabilities.

The payment clause should specify:

• The amount payable.
• The date or dates on which payment falls due.
• The method of payment, such as wire transfer, bank draft or other mechanism.
• The currency of payment.
• The account to which funds are to be remitted.

Ambiguity in any of these elements invites dispute. On a further practical note, where possible it is wise to reconfirm these details by telephone before transmitting payment.

Where the settlement involves a lump sum, the date for payment should be fixed by reference to a defined trigger, which would typically be execution of the agreement or an order of the court disposing of proceedings. For example, if settling a claim by a Part 36 offer, under Civil Procedure Rule (CPR) 36.14(6), if an accepted agreement includes an offer to pay or to accept a single sum of money, payment must be made within 14 days of acceptance, unless parties agree otherwise in writing.

Staged payments or contingent obligations cannot be structured through Part 36 offers, which require any defendant’s offer to pay money to be for a single lump sum (CPR 36.6). These arrangements therefore require a bespoke settlement agreement, typically given effect by a Tomlin order with express default provisions. The drafting must address: the triggers for each payment milestone; the consequences if a trigger fails to occur; the allocation of risk between the parties during the payment period; and any security or escrow arrangements protecting the payee’s position pending full satisfaction.

Consequences of non-payment

• As noted above, settlement agreements should, where possible, specify what happens if the paying party defaults. Common provisions include:
• A contractual rate of interest.
• To apply to the court to enforce the settlement terms, including for judgment for any outstanding sum where the settlement is recorded in a Tomlin order.
• Where the underlying claim has been stayed, the automatic revival of the claim in the event of material breach.
• The choice between these remedies depends on the commercial context and the structure of the settlement, but the point remains that they should be addressed expressly. A settlement that is silent on the consequences of default leaves the payee in the unsatisfactory position of having to commence fresh proceedings to enforce an agreement which was designed to avoid litigation.

Tax treatment and indemnities

The allocation of responsibility for tax treatment is sometimes overlooked in settlement negotiations but can have significant financial consequences. The agreement should specify whether the settlement sum is paid gross or net of tax, which party bears responsibility for any tax that may become payable, and whether indemnities or grossing-up provisions apply. Where the character of the payment is uncertain, for example, where it could be treated as income, capital or damages, the parties should agree a basis for the tax treatment and allocate the risk of a contrary determination.

No-admission wording

Settlement agreements routinely include a provision confirming that the agreement does not constitute an admission of liability. These clauses enable parties to resolve disputes pragmatically without creating evidential difficulties in other proceedings, regulatory contexts or from a public relations perspective. The paying party avoids the implication that payment constitutes an acceptance of fault, a point that could otherwise have collateral consequences in related proceedings, regulatory investigations or insurance coverage disputes. The receiving party avoids any suggestion that acceptance of the settlement amount represents a concession on the merits of their case, quantum or an acknowledgement that its claim was overstated.

Standard no-admission formulations provide that the agreement is entered into without any admission of liability, that neither party’s position is prejudiced in respect of any matter not covered by the agreement, and that the terms may not be referred to in other proceedings except for enforcement purposes.

Confidentiality

Confidentiality provisions in settlement agreements must balance the parties’ legitimate interest in maintaining privacy over the settlement terms against the constraints imposed by public policy, regulatory obligations and the rights of third parties.

It is generally accepted that parties may agree to keep the terms of the settlement, such as the financial consideration and the scope of the release, confidential. However, if the underlying facts of the dispute concern matters of public interest, that is, safety failures, regulatory breaches, environmental harm or employment misconduct, confidentiality provisions that purport to suppress these facts may be unenforceable as they would be contrary to public policy and may ultimately expose both parties to reputational risk (see box "Carve-outs" and feature article “Drafting confidentiality agreements: the DNA of an NDA”, www.practicallaw.com/9-536-5387).

Another mechanism that is commonly included within a confidentiality clause is a non-disparagement provision and an agreed joint statement announcing the settlement. This can help to ensure that neither party uses the settlement to disparage or discredit the other, and that the information conveyed to the wider public about the settlement is consistent.

The absence of an appropriate carve-out can create significant enforceability and compliance risks. However, practitioners should also be alert to the reputational and enforceability risks of overreaching confidentiality provisions. Best practice requires clear, proportionate obligations that identify with precision what is to be kept confidential, the duration of the obligation, the permitted recipients and the consequences of breach.

Dispute resolution clauses

In Petroleum Exploration, the parties had originally contracted under joint operating agreements (JOAs), each of which contained an arbitration agreement giving the arbitration tribunal in Pakistan or Singapore jurisdiction, depending on the agreement. When a dispute arose and was resolved by settlement, the settlement agreement contained a dispute resolution clause which provided that if a further dispute arose it should be arbitrated in London. A subsequent disagreement about the performance of the settlement was arbitrated at the International Chamber of Commerce in London where a final award was issued. Petroleum Exploration challenged the arbitrator's jurisdiction, contending that the disputed declarations and damages fell within the scope of the JOA arbitration agreements rather than the relevant settlement agreement's dispute resolution clause.

The High Court emphasised the language of the clause, applying a textual approach to construction on the basis that the settlement agreement was "a sophisticated, complex agreement drafted by skilled professionals". Furthermore, the court endorsed that where the dispute resolution clause is contained in a settlement agreement entered into for the purpose of resolving disputes under an earlier contract, its presumption has "particular potency". On that basis, the court concluded that the arbitration agreement in the settlement agreement was intended to resolve all disputes arising under, or as a result of an alleged breach of, the settlement agreement. The supersession was not comprehensive, as the JOAs continued to govern the parties' ongoing commercial relationship, but the settlement agreement's dispute resolution clause prevailed in respect of disputes concerning the settlement itself.

Practitioners should consider including within the settlement agreement a bespoke dispute resolution clause that clearly identifies the forum, the governing law and the procedural rules that are applicable to any dispute arising out of, or in connection with, the settlement. Ideally, the dispute resolution clause should be drafted with an awareness of any antecedent dispute resolution provisions, and should specify whether it is intended to supersede, supplement or co-exist with them. Where the intention is supersession, this can be stated expressly, although  Petroleum Exploration confirms that, even if supersession language is absent, the courts may construe a settlement agreement's dispute resolution clause as prevailing.

PROCEDURAL MANAGEMENT

Settlement agreements are negotiated, approved, implemented and managed within the context of the underlying proceedings and the commercial realities of the parties’ positions. A number of important procedural considerations arise in practice.

Timing

The decision to settle, and its timing, are matters of strategic judgment that depend on a complex interaction of legal, commercial and tactical factors.

In multi-party proceedings, separate offers can be made, which require each party to evaluate and respond within compressed and, potentially, overlapping timeframes. It can result in some parties settling without other parties. This occurred in the RBS Rights Issue litigation where all but one claimant group settled in advance of trial, leaving the remaining claimant group to continue the proceedings until a further settlement was achieved later in the proceedings (RBS Rights Issue Litigation [2017] EWHC 463 (Ch), RBS Rights Issue Litigation [2017] EWHC 1217 (Ch); www.practicallaw.com/w-008-7827). Late settlement by co-claimants can alter the litigation landscape for those that remain.

Settlement timing can also be shaped by the Part 36 regime. CPR 36.7 permits offers at any stage, including the pre-action stage, and CPR 36.17(5)(b) directs the court to consider when an offer was made in determining whether the costs consequences would be unjust. Earlier offers carry greater weight and costs consequences under CPR 36.17 create significant pressure as the trial date approaches. For a claimant, a carefully judged Part 36 offer can be a powerful tactical tool since if the defendant fails to beat the offer at trial, depending on the award, the claimant may be entitled to enhanced interest of up to 10% above base rate, indemnity costs from the expiry of the relevant period, and an additional amount of up to £75,000 (CPR 36.17(4)).

A defendant’s Part 36 offer also places the claimant at some risk since if the claimant fails to obtain a judgment more advantageous than the offer, it may be required to pay the defendant’s costs from the expiry of the relevant period (CPR 36.17(3)). Part 36 therefore creates a clear incentive for both sides to assess their position realistically and engage with settlement early. However, the automatic costs consequences under CPR 36.17(3) and (4) do not apply to offers made less than 21 days before trial, unless the court has abridged the relevant period (CPR 36.17(7)(c)).

Approval and authority to settle

In Blower v GH Canfield LLP, the Court of Appeal considered a professional negligence claim against a firm of solicitors that had represented several members of the same family in a mediated settlement for bankruptcy-related claims ([2025] EWCA Civ 1627). The claimant alleged conflicts of interest and inadequate advice. The appeal was dismissed as the claimant failed to establish loss, and the conflict of interest issue had not been properly pleaded at first instance. Nevertheless, the case serves as a helpful reminder that practitioners must be alert to potential conflicts before embarking on settlement negotiations. A settlement that is approved in circumstances where the negotiating party was subject to an undisclosed conflict may subsequently be challenged, undermining the finality that the settlement was designed to achieve (see box "Approval in multi-party disputes").

Internal communications

The period between the execution of a settlement and its full implementation can present a challenge for internal confidentiality. During this window, the terms may need to be communicated to a range of internal stakeholders, that is, management, boards, auditors, regulators and employees, while simultaneously being withheld from the public, the media and, potentially, from other parties to the underlying proceedings.

The effective management of this period requires advance agreement on:

• The scope and timing of any public announcement or press statement.
• The persons within each party’s organisation who are to be informed.
• The terms in which internal communications may refer to the settlement.
• The consequences of unauthorised disclosure.

Within corporate groups, particular care is required to ensure that confidential settlement terms are not disseminated beyond those who have a need to know, particularly where group entities may be involved in related proceedings. These issues are particularly acute for listed companies, which are subject to stringent obligations regarding inside information and market disclosure, making careful management of these considerations even more essential.

Legal costs

The costs exposure of both parties is an important variable in the decision to settle, and the level at which claimants are prepared to settle often increases in direct proportion to the legal costs that they have incurred, including the cost of litigation funding and after-the-event insurance (see box "Clauses on legal costs").

COURT OVERSIGHT

The degree of judicial oversight applicable to settlement agreements varies significantly depending on the forum and the procedural context in which the settlement is reached. In ordinary High Court civil proceedings, the court’s supervisory role is limited. By contrast, in collective proceedings before the Competition Appeal Tribunal (CAT), the court exercises active scrutiny over both the decision to settle and the terms of distribution.

Obligations to inform the court

The obligation of parties to inform the court of settlement discussions, particularly where a judgment is pending, was addressed in Gurney Consulting Engineers v Gleeds Health & Safety Ltd and another where the parties reached a settlement the day before the draft judgment was due to be finalised by the court ([2006] EWHC 536 (TCC)). The High Court emphasised that parties that are engaged in meaningful settlement discussions are under an obligation to inform the court without delay, particularly where judgment has been reserved. The foundation of this duty, the court made clear, is not personal inconvenience to the judge. It is “the requirement, which should be obvious to all, that the court’s resources should be properly and efficiently deployed.”

In HFC v HSBC Bank Plc (formerly Midland Bank Plc), the Court of Appeal noted that "it is the duty of the parties and their professional advisers to inform the court immediately [when] they become aware of any development which may make it unnecessary for judgment to be delivered" ([2000] 2 WLUK 330). For practitioners, this requires an exercise of judgment on when discussions have become sufficiently concrete to warrant notification. Premature notification may prejudice negotiations or procedural positions while delayed notification may attract judicial criticism and, in extreme cases, costs sanctions. The prudent course is to notify the court as soon as there is a realistic prospect that the proceedings will be resolved, particularly where judgment is reserved or a hearing date is imminent.

Disposal of court proceedings

Once a settlement has been reached, the parties must agree on the mechanism for disposing of the proceedings. The principal options are:

• A consent order dismissing or discontinuing the claim, or otherwise giving effect to the settlement.
• A Tomlin order under which the proceedings are stayed on agreed terms, usually set out in a schedule, with permission to apply for the purpose of carrying those terms into effect.
• Where appropriate, a consent judgment, for example for payment of an agreed sum.

As previously noted, Tomlin orders are commonly used to record settlements, particularly where the terms contain confidential or contractual provisions that extend beyond the scope of the underlying proceedings. However, it is important to appreciate their limitations as identified in Riley; that is, that a Tomlin order will not bar claims of a nature not contemplated at the time of settlement. As with any settlement agreement, the terms of the Tomlin order and the scope of any release contained in its schedule must be drafted with precision.

Judicial oversight

A practitioner advising on collective settlements should consider whether the settlement terms can be treated as a purely private matter between the parties. Typically, there is little judicial oversight of the settlement terms in High Court civil proceedings. This is contrasted with how settlements are approved in the CAT, where approval is not a formality; it requires detailed preparation and may involve modifications directed by the court.

In Gutmann v First MTR South Western Trains Ltd and another, the CAT considered a joint application for the approval of a collective settlement of damages up to £25 million ([2024] CAT 32; see News brief "UK rail operators and abuse of dominance: claim hits the CAT’s buffers", www.practicallaw.com/w-048-5289). The CAT emphasised that it retains supervisory jurisdiction over the distribution of settlement proceeds among class members, notwithstanding private contractual arrangements between the class representative, the funder and the defendant. The CAT rejected the original proposal for distribution and required modifications. It observed that it will not simply defer to the parties’ agreed terms and that it must be independently satisfied that the terms of the proposed settlement are “just and reasonable” within the meaning of section 49A(5) of the Competition Act 1998.

This approach was applied and developed in Mark McLaren Class Representative Ltd v MOL (Europe Africa) Ltd ([2026] CAT 6). Following a substantive trial, the CAT approved a £54 million collective settlement between the class representative and the settling defendants, while the trial judgment remained pending. In its judgment, the CAT emphasised the need for full and frank disclosure, scrutiny of the distribution plan and empirical evidence of the likely take-up rate among class members. The CAT again stressed its supervisory role in ensuring that distributions are fair and reasonable, and confirmed its power to order the payment of common fund deductions before the distribution of damages to class members.

LATER CLAIMS

Settling a claim is designed to provide finality, yet finality is not always guaranteed by the execution of an agreement. If a party continues to feel aggrieved or subsequently feels that it agreed to a bad bargain, it may seek to advance claims, notwithstanding the existence of a prior settlement. There are several ways in which a respondent may seek to resist these claims.

Abuse of process

Henderson v Henderson provides that a party is precluded from raising in subsequent proceedings matters which were not, but could and should have been, raised in earlier proceedings ((1843) 3 Hare 100). If they do bring such a claim, this would be considered an abuse of process. The Court of Appeal in Johnson v Gore Wood & Co defined the process for applying this rule: the court should adopt a broad, merits-based assessment of whether the pursuit of the subsequent claim constitutes a misuse of the court’s process, rather than applying a rigid requirement that if the claim could have been brought it should have been brought ([2002] 2 AC 1).

The Court of Appeal’s decision in Lish confirms that this doctrine operates in the context of settlements just as it does following a judgment. Where a claim has been compromised by settlement, the question is not merely whether the subsequent claim falls within the contractual release, although that is relevant, but whether its pursuit is an abuse of process in the round. As noted above, in Lish, the infringement claims were struck out as abusive notwithstanding that their status under the contractual release was debatable (see "Scope" above). Applying Johnson, the court stated that the claims were of the same category as those originally pleaded, were known to Mrs Lish at the time of settlement, and had been intentionally omitted from the proceedings. Therefore, the court concluded that the subsequent pursuit of these claims would be a misuse of the court’s process.

For practitioners, the implication is that if a party wishes to preserve additional claims that have not yet been raised, the onus is on them to ensure that the scope of the settlement agreement is expressly limited to the claims that are being compromised.

Limitations on scope

In Riley, the issue was whether a settlement agreement involving the same parties and in relation to shares in the same company, which had been given effect by a Tomlin order, barred a subsequent claim. The court applied the cautionary principle established in BCCI that in the absence of clear language, a court will be "slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware". The court in Riley held that the settlement did not bar the subsequent claim, which was of a nature not contemplated at the time of the Tomlin order.

It is not that releases cannot extend to unknown or unconsidered claims as Luxottica confirms that they can. However, the language must be sufficiently clear to support that construction, interpreted both in the context of the specific claim and globally across the agreement. The practical consequence for practitioners is that a party which is seeking to ensure comprehensive finality must expressly address the possibility of unknown and unconsidered claims. These terms must be used deliberately and with awareness of the BCCI cautionary principle. The broader the language, the more important it is that both parties understand and intend the breadth of what they are agreeing.

Sharp practice doctrine

The “sharp practice” principle, which was also considered in BCCI, provides that a general release may not be enforced where a party, having knowledge of existing or potential claims falling within the scope of the release, deliberately conceals those claims from the counterparty and thereby seeks to take unfair advantage of the release.

The scope and application of this doctrine were examined in Luxottica. Luxottica argued that Visa’s failure to draw attention to the possibility that the settlement might encompass GrandVision’s future claims amounted to sharp practice that should preclude enforcement of the release. The court accepted the existence of the doctrine in principle but found that it had no application on the facts. The distinction drawn was between concealment and silence: silence was not considered sharp practice. As the court observed, Visa’s negotiator “was not baiting a trap, or exploiting a known error. She was simply opening a door into which Luxottica chose to step”. Furthermore, the parties had negotiated at arm’s length, each with the benefit of legal advice, and the breadth of the release language was apparent on the face of the agreement.

The sharp practice doctrine has borne little modern fruit, and practitioners should not rely on it as a safety net for imprecise drafting. A party that enters into a broad release without conducting an adequate causes of action audit will not be rescued by an argument that the counterparty should have volunteered information about the claims being extinguished. The doctrine seems to operate where one party has actively misled the other or concealed claims in bad faith.

ACHIEVING CERTAINTY

The decisions examined in this article confirm a consistent judicial philosophy that settlement certainty is earned by careful precision, not by generalities. The courts will enforce what the parties agreed but will not assume that they agreed to more or less than the language and context support.

Practitioners should approach settlement drafting with the same rigour as they approach the underlying dispute; that is, with disciplined analysis, express language and clear communication. Treated in this way, a settlement agreement can achieve genuine finality as intended.