When a “Substantial Payment” is not enough

In a recent trade-mark dispute, the parties entered into a settlement agreement of sorts. The dispute was over use of the mark GUTTERFILTER and resulted in litigation in both Canada and the US. Under the terms of settlement, one party would cease its use of the mark, and the other party would make a payment – a “substantial payment” no less.

In Gutter Filter Company L.L.C. v. Gutter Filter Canada Inc.,  2011 FC 234, the court had to decide whether this settlement agreement was a binding contract. One side argued that the terms were too vague to be enforceable. In its analysis, the court concluded that: “In light of the malleable meaning of the word “substantial,” the language used in the Settlement Document, “after a substantial payment has been received,” lacks certainty. “Substantial” in the context it was used could arguably mean a wide range of different amounts.”  As a result, there was no binding agreement to settle, and the litigation continued.

Lessons for business?

  • Settlement negotiations are often highly charged and create special circumstances that require additional attention to the specifics of the written document. Parties may want to gloss over the “fine print” but there’s a reason that lawyers want to focus on clarity of language.
  • Settlement may require quick action at or shortly after the meeting. In this case, the parties met and tried to settle, but waited too long before documenting the settlement terms. In the intervening period, their relationship soured again, and the settlement terms were called into question.

Calgary – 07:00 MST

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