Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller

Exercise 7

BACKGROUND AND FACTS Basis Technology Corporation created software and provided technical services for a Japanese-language Web site belonging to Amazon.com, Inc. The agreement between the two companies allowed for separately negotiated contracts for additional services that Basis might provide to Amazon. At the end of 1999, Basis and Amazon entered into stock-purchase agreements. Later, Amazon objected to certain actions related to the securities that Basis sold. Basis sued Amazon for various claims involving these securities and for failing to pay for services performed by Basis that were not included in the original agreement. During the trial, the two parties appeared to reach an agreement to settle out of court via a series of e-mail exchanges outlining the settlement. When Amazon reneged, Basis served a motion to enforce the proposed settlement. The trial judge entered a judgment against Amazon, which appealed.
IN THE LANGUAGE OF THE COURT
SIKORA, J. [Judge]
* * * * * * * On the evening of March 23, after the third day of evidence and after settlement discussions, Basis counsel sent an e-mail with the following text to Amazon counsel: [Amazon counsel]-This e-mail confirms the essential business terms of the settlement between our respective clients * * *. Basis and Amazon agree that they promptly will take all reasonable steps to memorialize in a written agreement, to be signed by individuals authorized by each party, the terms set forth below, as well as such other terms that are reasonably necessary to make these terms effective.
* * * * [Amazon counsel], please contact me first thing tomorrow morning if this e-mail does not accurately summarize the settlement terms reached earlier this evening. See you tomorrow morning when we report this matter settled to the Court. At 7:26 a.m. on March 24, Amazon counsel sent an e-mail with a one-word reply: "correct." Later in the morning, in open court and on the record, both counsel reported the result of a settlement without specification of the terms. On March 25, Amazon's counsel sent a facsimile of the first draft of a settlement agreement to Basis's counsel. The draft comported with all the terms of the e-mail exchange, and added some implementing and boilerplate [standard contract provisions] terms.
* * * * [Within a few days, though,] the parties were deadlocked. On April 21, Basis served its motion to enforce the settlement agreement. Amazon opposed. * * * The motion and opposition presented the issues whether the e-mail terms were sufficiently complete and definite to form an agreement and whether Amazon had intended to be bound by them.
* * * * We examine the text of the terms for the incompleteness and indefiniteness charged by Amazon. Provisions are not ambiguous simply because the parties have developed different interpretations of them. [Emphasis added.]
* * * * We must interpret the document as a whole. In the preface to the enumerated terms, Basis counsel stated that the "e-mail confirms the essential business terms of the settlement between our respective clients," and that the parties "agree that they promptly will take all reasonable steps to memorialize" those terms. Amazon counsel concisely responded, "correct." Thus the "essential business terms" were resolved. The parties were proceeding to " memorialize" or record the settlement terms, not to create them.
* * * To ascertain intent, a court considers the words used by the parties, the agreement taken as a whole, and surrounding facts and circumstances. The essential circumstance of this disputed agreement is that it concluded a trial.
* * * As the trial judge explained in her memorandum of decision, she "terminated" the trial; she did not suspend it for exploratory negotiations. She did so in reliance upon the parties' report of an accomplished agreement for the settlement of their dispute.
* * * * In sum, the deliberateness and the gravity attributable to a report of a settlement, especially during the progress of a trial, weigh heavily as circumstantial evidence of the intention of a party such as Amazon to be bound by its communication to the opposing party and to the court.
DECISION AND REMEDY The Appeals Court of Massachusetts affirmed the trial court's finding that Amazon intended to be bound by the terms of the March 23 e-mail. That e-mail constituted a complete and unambiguous statement of the parties' desire to be bound by the settlement terms.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that the attorneys for both sides had simply had a phone conversation that included all of the terms to which they actually agreed in their e-mail exchanges. Would the court have ruled differently? Why or why not?
THE LEGAL ENVIRONMENT DIMENSION?What does the result in this case suggest that a businessperson should do before agreeing to a settlement of a legal dispute?