Throughout the litigation process, parties and their legal counsel may engage in settlement discussions through email correspondence, where the terms of a settlement agreement are negotiated and agreed upon. As demonstrated in JH Drilling Inc v Barsi Enterprises Ltd,[1] courts recognize that a settlement reached through email correspondence may constitute a contract binding upon the parties. As a binding contract, the parties’ settlement agreement may preclude further litigation.

Commercial parties should be aware of the potential consequences to entering into settlement discussions via email correspondence and the legal principles applied by courts when determining if such discussions bind a party to the terms contained therein. A plaintiff resiling from the terms of a binding settlement agreement may have its claim summarily dismissed. 

Background

In JH Drilling, JH Drilling Inc (the “Plaintiff”) assigned a surface material lease to Barsi Enterprises Ltd (“Barsi”), permitting Barsi to excavate sand and gravel on a parcel of land.[2] Barsi abandoned the lease after it failed to perform to Barsi’s expectations and the Plaintiff subsequently commenced an action against Barsi, as well as two individuals carrying on business as Misty Valley Trucking (collectively, the “Defendants”), for breach of contract. The Defendants counterclaimed as against the Plaintiff and the Plaintiff’s principal, for, among other things, misrepresentation.[3]

The Alberta Court of King’s Bench (the “Court”) dismissed of the Plaintiff’s application for summary judgment, and the parties settled the matter through email correspondence only, by way of the following partial exchange:[4]

[15] On July 30, 2025, Mr. Harms responded,

“[The Plaintiff] accepts your offer [for the] sale of the gravel pile with proceeds to be split 50-50 as has been proposed by you in the past. This would be a full settlement of the main claim and the counter claim without costs”.

[16]  On August 7, 2025, counsel for the Defendants then responded:

“I confirm we are in agreement and we have a deal as follows:

    1. The parties will use their reasonable efforts to sell the gravel pile. The net proceeds will be split 50-50.
    1. The main claim and counterclaim will be discontinued on a without costs basis.
    1. There will be a full mutual release between the parties.

I will send you a draft settlement agreement that we can sign …”.

However, after the Defendants’ legal counsel provided a proposed settlement agreement containing the above-noted terms (the “Original Settlement Agreement”), the Plaintiff’s legal counsel provided a revised settlement agreement, including a provision that the Defendants shall pay the Plaintiff an amount of $40,000.00, representing the amount of royalties owed to the Government of Alberta under the surface material lease (the “Revised Settlement Agreement”).[5] The Defendants refused to sign the Revised Settlement Agreement and, instead, brought an application for an Order for summary dismissal, arguing that the Original Settlement Agreement constituted a binding contract that resolved the parties’ dispute.

The issues before the Court were whether the Original Settlement Agreement was binding upon the parties and, if so, whether the Plaintiff’s claim should be summarily dismissed on the basis that the Original Settlement Agreement entirely resolved the parties’ dispute.[6]

Key legal principles applicable to the formation of settlement agreements and applications for summary dismissal

The Court’s decision was guided by the legal principles applying to the formation of contracts:

  • Mutual intention to create a binding contract: Like other types of contracts, an enforceable settlement agreement requires an offer, acceptance of that offer, and a mutual intention to create a legally binding contract.[7] Pursuant to the Supreme Court’s decision in Sattva Capital Corp. v Creston Moly Corp., courts determine the parties’ intent by reading the settlement agreement “as a whole, giving the words used their ordinary and grammatical meaning consistent with all of the surrounding circumstances”.[8]
  • Agreement on essential terms: Next, courts determine whether the parties have agreed upon the settlement agreement’s essential terms, with consideration given to the settlement agreement’s commercial context.[9]

The Court also considered the legal principles applicable to applications for summary dismissal:

  • No genuine issue requiring a trial: A defendant may apply for summary dismissal where there is no merit to the plaintiff’s claim or any part of it. [10] The defendant must establish, on a balance of probabilities, that there is no genuine issue requiring a trial, such that the court may make a fair and just determination on the merits based upon the record before it.[11]

Settlement agreements require a mutual intention to contract on essential terms

The Court found that a clear offer and acceptance was present in the parties’ email correspondence. Therefore, in determining whether the parties’ email correspondence constituted a binding settlement agreement, the Court was required to determine whether the parties had a mutual intention to contract.

The email correspondence indicated “that the Plaintiff attempted to persuade the Defendants to assume … responsibility to make royalty payments” by assuming lease responsibilities, without success.[12] Further, both parties were represented by counsel and there was no indication that “the Plaintiff was coerced or unduly influenced into reaching a settlement agreement”.[13] Finally, both parties “confirmed in writing that they had a settlement”.[14] Thus, the Court found that, in the circumstances, the parties clearly intended to enter into a binding settlement agreement.

Next, the Court considered whether the parties agreed upon the settlement agreement’s essential terms. The Court found that an objective reading of the parties’ email correspondence indicated “that the parties would sell the gravel and split the net proceeds on a 50-50 basis … discontinue the entire Action and Counterclaim … [and] release the other from any further liabilities”.[15] The Defendants clearly rejected the Plaintiff’s attempt to have the Defendants assume any other liabilities under the surface material lease and there was nothing in the Plaintiff’s acceptance of the Defendants’ offer to indicate that the Original Settlement Agreement was incomplete or conditional.[16] Therefore, liability for royalty payments was not an essential term of the Original Settlement Agreement.

Conclusion

Given the parties’ intention to contract upon all essential terms, the Court was required to determine whether the Original Settlement Agreement resolved the parties’ dispute entirely, such that summary dismissal was warranted pursuant to Rule 7.3 of the Alberta Rules of Court.

The Original Settlement Agreement provided that the parties shall sell the gravel and split the proceeds equally, discontinue the claim and counterclaim, and enter into a mutual release.[17] Thus, the Court found that, as a binding contract, the Original Settlement Agreement’s terms brought the entirety of the action to an end and summary dismissal was warranted in the circumstances.[18]

Practical takeaways

Settlement agreements constitute binding contracts, and the legal principles of contractual interpretation apply. In the event of ambiguity or where the parties disagree as to a settlement agreement’s essential terms, email correspondence may be relevant. To avoid similar disputes, businesses and legal teams should:

  • Clearly indicate offers and acceptance: Use language in email correspondence and other written communications that clearly indicates whether a settlement agreement’s term is accepted, rejected, or requires amendments. Clear language helps prevent disputes as to whether a binding contract exists.

  • Address all essential terms: Identify all of the settlement agreement’s essential terms at the outset of settlement discussions. Clearly indicating to the other party the circumstances in which an agreement may or may not be reached helps guide settlement discussions and prevents misunderstandings as to whether the parties have a mutual intention to contract upon essential terms.
  • Address the risk of summary judgment: Draft all email correspondence and written communications in respect to settlement discussions with consideration given to its use in future court proceedings. A party may risk having summary judgment granted against them where written communications indicate that the parties had a mutual intention to contract upon all essential terms.

Settling disputes can result in costly litigation. Miller Thomson’s Commercial Litigation team can assist you in negotiating and drafting settlement agreements and in resolving disputes efficiently. If your business needs guidance regarding dispute resolution, contact us today to safeguard your financial interests.

[1] JH Drilling Inc v Barsi Enterprises Ltd., 2026 ABKB 48 [JH Drilling].

[2] Ibid at para 6.

[3] Ibid at para 5.

[4] Ibid at paras 15-16.

[5] Ibid at para 17.

[6] Ibid at para 21.

[7] Ibid at para 27, citing Beier v Proper Cat Construction Ltd., 2013 ABQB 351 at para 72; Olivieri v Sherman, 2007 ONCA 491 at para 41.

[8] Ibid at para 28, citing Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53 at para 47.

[9] Ibid at para 30.

[10] Sattva Capital Corp. v Creston Moly Corp. Ibid at para 35, citing Alberta Rules of Court, Alta Reg 124/2010, r. 7.3(1)(b) [Alberta Rules of Court].

[11] Ibid, citing Clearbakk Energy Services Inc v Sunshine Oilsands Ltd, 2023 ABCA 96 at para 5;
 PricewaterhouseCoopers Inc v Perpetual Energy Inc, 2021 ABCA 16 at para 69.

[12] Ibid at paras 24-25.

[13] Ibid at para 26.

[14] Ibid at para 29.

[15] Ibid at para 31.

[16] Ibid at para 32.

[17] Ibid at para 39.

[18] Ibid at paras 39-40.