THE BOTTOM LINE
- Settlement agreements are exceptionally robust. A party’s inability to secure financing to meet its obligation does not automatically void the deal, even if the agreement’s wording seems ambiguous.
- Discovering that problems are worse than anticipated after signing a settlement is generally not grounds for cancellation. If you are aware of an issue, you accept the risk of its full extent when you settle.
- To ensure finality and avoid future litigation, courts will interpret settlement agreements based on the parties’ intended purpose—to end the dispute—rather than allowing procedural clauses to be used as escape hatches.
THE DETAILS
This case serves as a crucial reminder of the binding nature of settlement agreements. The dispute began over a construction project in Curaçao between a property owner and the developer, Key In Investment B.V. To resolve their differences, the parties signed a court-recorded settlement agreement stipulating a final payment of NAf 30,000 from the owner to the developer. However, the owner later refused to pay, arguing the deal was contingent on him securing a bank loan that was subsequently denied. He further sought to nullify the agreement after discovering what he claimed were new, more severe defects in the property post-settlement.
The Joint Court of Justice rejected the owner’s arguments, focusing on the fundamental purpose of a settlement: to create certainty. The court acknowledged the agreement contained “somewhat confusing” language about “continuing the procedure” if the bank did not approve the loan within 30 days. However, interpreting the parties’ true intentions, the court ruled this was not a condition voiding the deal. Instead, it was a practical mechanism to allow the developer to obtain an enforceable judgment for the agreed amount if payment was not made, effectively giving the owner more time, not an exit strategy. The core obligation to pay remained unconditional.
Furthermore, the court dismissed the attempt to invalidate the agreement based on dwaling (a mistake or error). The owner claimed he was unaware of the full extent of the construction defects, such as faulty wiring, when he signed. The court, however, noted that the owner was already aware of some defects prior to the settlement. By agreeing to a final settlement without conducting a full expert inspection, he accepted the risk that the problems could be more extensive than known at the time. A settlement is intended to end all disputes—both known and unknown—related to the matter. A party cannot settle and then reopen the case due to “buyer’s remorse” when the settled issue turns out to be worse than hoped.
SOURCE
Joint Court of Justice of Aruba, Curaçao, Sint Maarten and of Bonaire, Sint Eustatius and Saba
