Settlement Authority and a Client Who Changes Her Mind
You act for Mr. Bélanger in a wrongful dismissal action. At a mediation, his employer offers $95,000 plus a neutral reference. Your client's stated reserve was $110,000, but during the session he tells you by phone that he authorizes you to settle at $95,000 if the reference is confirmed in writing. You convey the acceptance to opposing counsel. Ten minutes later, Mr. Bélanger calls back and says he has changed his mind and revokes the authority. Opposing counsel has already begun drafting the minutes of settlement and says the deal is binding. The reference letter has not yet been produced.
1. Is there a binding settlement, and does the revocation matter?
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The key question is whether the client gave actual authority and whether a binding agreement was formed before revocation. If Mr. Bélanger expressly authorized settlement at $95,000 conditional on a written reference, and you communicated unqualified acceptance, a contract may have been formed at that moment, and a later change of mind does not undo it. The condition about the written reference must be examined: if it was a condition precedent to formation, no contract exists until it is satisfied; if it was merely a term to be documented, the agreement may already bind.
The firm should not assume either way. It should review the precise words used, the timing of the acceptance and revocation, and any mediation agreement on authority. If a binding settlement exists, the client is bound and the firm should explain the consequences.
2. What are your professional obligations now, and what do you tell the client?
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You must be candid with the client about what you said and when. Explain that you conveyed acceptance on his instructions, that opposing counsel asserts a binding agreement, and that the revocation may have come too late. Do not misrepresent the sequence to opposing counsel or the court.
If the client disputes the settlement, he may need independent advice about whether to bring a motion to set it aside, and the firm should consider whether it can continue to act given that its own conduct is now in issue. You must not disclose the client's confidences to opposing counsel without instructions, but you also cannot conceal the fact that acceptance was communicated. Preserve your notes and the phone records. If the client wishes to resile, the firm should not simply abandon the settlement without a lawful basis.