Key Takeaway
Court finds substantial compliance with settlement stipulation sufficient grounds to vacate judgment, demonstrating rare but important exception to strict enforcement rules.
Stipulations of settlement are binding agreements that courts typically enforce strictly. When parties enter into these agreements to resolve their disputes, they’re generally held to their exact terms. However, New York law recognizes a narrow exception: courts may relieve parties from enforcement when there has been “substantial compliance” with the stipulation’s requirements.
This concept of substantial compliance creates an important safety valve in the legal system. Unlike situations where inability to pay alone won’t excuse performance, substantial compliance focuses on whether the party has made good faith efforts to fulfill their obligations under the agreement, even if they haven’t met every technical requirement.
The standard is intentionally high. Courts must balance the sanctity of settlement agreements against fairness when a party has substantially performed their obligations. This doctrine prevents harsh results where minor technical violations would otherwise void an agreement despite meaningful compliance.
Understanding how courts evaluate stipulated agreements and their enforcement becomes crucial for attorneys negotiating settlements, as the terms and conditions can significantly impact future enforcement actions.
Jason Tenenbaum’s Analysis:
Capitol Discount Corp. v McFarlane, 2016 NY Slip Op 50140(U)(App. Term 2d Dept. 2016)
“Relieving a party from enforcement of a stipulation of settlement is appropriate upon a finding of substantial compliance with the stipulation of settlement (see Rockaway One Co. v Williams, 3 Misc 3d 25, 27 ). Here, the record demonstrates that defendant had substantially complied with the stipulation of settlement. We conclude, under the circumstances presented, that the Civil Court did not improvidently exercise its discretion in conditionally granting defendant’s motion to vacate the judgment.”
You do not see this often.
Key Takeaway
The Capitol Discount Corp. case represents an unusual victory for defendants seeking relief from stipulation enforcement. Courts rarely find substantial compliance sufficient to vacate judgments, making this decision particularly noteworthy. The ruling reinforces that while stipulations are generally binding, meaningful compliance with settlement terms can provide grounds for relief, even when technical requirements aren’t perfectly met. This case offers hope for parties who have made good faith efforts to honor their settlement obligations despite minor shortcomings.
