Unreasonable Delay in Executing Settlement Agreement May Constitute a Material Breach


By: John Perten

June 5, 2020

How long can you delay in signing a contract before the agreement it memorializes is stale and unenforceable?  In Dalrymple v. Town of Winthrop, the MA appeals court determined that under the facts of that case, a year is too long.  The decision makes clear that the failure to sign a written agreement after agreeing to all of its material terms, and acting in a manner contrary to the terms of the agreement, will be deemed a repudiation of the agreement thereby rendering it unenforceable.

Dalrymple was a police officer.  She brought a discrimination lawsuit against the Town of Winthrop.  Just prior to trial, the parties settled the case.  As part of the settlement, the Town agreed to pay Dalrymple $110,000 while Dalrymple agreed to dismiss her lawsuit and release all of her claims.  Her counsel reported the case settled, and an order entered giving the parties 60 days to finalize their agreement and file the dismissal papers.

Approximately two weeks after settling, the Town forwarded a draft settlement agreement.  It contained a release covering all claims through the date of execution of the agreement.  In the interim, however, Dalyrmple filed a union grievance against the Town because she believed she had been improperly reassigned.  She refused to sign the agreement and insisted that there had to be a carve-out from the release for her new grievance. After some negotiation, she advised that she was withdrawing from the settlement and filed a motion with the court to restore the case that had been reported settled back to the active trial list.  That motion was denied. She also filed a third grievance.  About a year later, she pivoted and signed the settlement agreement, with the release language that carved out the subsequent grievance. Although the decision does not say so, presumably, Dalyrmple wanted her money.  The Town refused to sign the agreement and argued that by delaying a year and litigating issues that were covered by the release, even with the requested carve out, Dalyrmple had effective repudiated the agreement, thereby excusing the Town from any obligation to perform.  Dalyrmple sued to enforce the agreement. The trial court agreed with the Town that the agreement was unenforceable, and Dalyrmple appealed.

The appeals court affirmed the trial court decision.  It noted that repudiation of an agreement is a material breach which excuses the other side from performing.  To determine whether a repudiation had occurred, it looked for a “definite and unequivocal manifestation of intent [not to render performance].”  It held that by attempting to restore the settled case to the active trial list and by litigating (through her grievances) issues that she had agreed to release, Dalyrmple made it clear that she would not live up to the “essential and inducing elements of the contract,”  thereby breaching it.  As such, the Town had no obligation to perform (which presumably meant it did not have to pay the $110,000 to Dalyrmple).

The Court made it clear that absent agreement of the parties, the law will impose a “reasonable” amount of time to execute a formal agreement.  What is “reasonable” will depend on the specific facts of the case.  The Court refused to say that a one-year delay would, in all cases, be unreasonable.  The cautionary takeaway, however, is that once the parties reach agreement on the materials terms of a deal, one party’s refusal to sign the formal document in a “reasonable” amount of time coupled with a clear failure to abide by the agreed upon terms could be deemed a material breach.  So, when you shake someone’s hand and agree to a deal, you need to abide by the terms of that deal and act with reasonable promptness in finalizing the formal documents.  This further highlights that if the parties to an agreement do not intend it to be enforceable until formal documents are signed, the parties need to state this condition clearly and act accordingly.