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Law: compromise agreements – the importance of wording

In a recent case, Collidge v Freeport plc, Mr Collidge attempted to argue ‘out of’ a compromise agreement as it had the effect of stopping his compensation promised in the agreements.

Mr Collidge was the founder of Freeport, which many may recognise as the name of a number of out of town shopping precincts.

The agreement had been constructed when the allegations of financial impropriety had come before the board of the company.

At the time it was initially suggested that Mr Collidge should be suspended but he indicated he would rather resign and negotiate a compromise agreement.

The agreement was worded to require Mr Collidge to warrant there were not circumstances which would give the board the right to terminate his employment without notice (summary dismissal for gross misconduct).

Mr Collidge was down to receive almost half a million pounds under the agreement.

Unfortunately for Mr Collidge, the board continued to investigate and, in fact found evidence which would have allowed them to so terminate his employment and so payment was withheld as the agreement had been breached by Mr Collidge.

None of the arguments by Mr Collidge’s legal representatives swayed the court to take any view other than the contract had been broken and Mr Collidge didn’t see his money.

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