Introduction to Mary Carter Agreement:
The Mary Carter Agreement is an agreement between plaintiff and defendants in multi-party litigation. When a dispute involves a large number of the party, This agreement can be used to settle the claim. The Agreement allows the parties to settle claims against the settling defendants while at the same time maintaining claims against the non-settling defendants. Entering into such an agreement allows the plaintiff some sort of guaranteed recovery. It also allows the plaintiff to achieve partial success and some certainty.
In this agreement, the settling defendant’s liability is fixed to a pre-determined amount while the recovery to be received by the plaintiff is also fixed and it won’t change irrespective of the outcome of the suit. The Agreement also puts pressure on the non-settling defendants to come to a settlement as the liability of the non-settling defendants goes on increasing.
In this agreement, it is agreed that the settling defendants won’t be made liable for any form of damages, but the settling defendants will impart liability against the non-settling defendants. The law requires that the existence of any sort of Mary Carter Agreement should be disclosed in the beginning only; otherwise, it will not serve the ends of justice.
Parties Involved in Mary Carter Agreement
Following parties are involved in this Agreement:
The plaintiff is the person who is claiming the disputed amount. The Mary Carter Agreement provides some sort of certainty to the plaintiff to recover some amount. The claim of plaintiff sustains against non-settling defendants.
2. Settling Defendants:
These are the defendants who agree to pay a specified amount to the plaintiff in the case of multi-party litigation. The liability is of settling defendants is limited upto the pre-determined amount only.
Purpose of the Mary Carter Agreement
Following is the purpose of the agreement:
- It fixes the liability of the settling defendants to a pre-determined amount. The defendants cannot be made to pay more despite the outcome of the trial of the suit.
- It provides certainty to the plaintiff that he/she will recover some fix amount against his claim. The plaintiff cannot claim more than what has been pre-determined in the agreement despite the outcome of the trial of the suit.
- The Mary Carter Agreement also put pressure on the non-settling defendants to reach a settlement as there liability goes on increasing.
Contents of the Mary Carter Agreement
Following are to be included in a well drafted Mary Carter’s Agreement:
- Date of entering into Agreement: The greement should clearly lay down the date on which it is entered upon between the parties.
- Details of Plaintiff: The Mary Carter agreement should also provide the details of the plaintiff to the suit.
- Details of Settling Defendant: The Mary Carter Agreement should also provide details of the settling defendants like their name, address, liability, etc
- Claims of the Plaintiff: This agreement should also provide details about the claim of the plaintiff, which is due.
- Amount agreed to be paid: The Mary Carter Agreement should also provide the details of the amount of consideration agreed by the parties. It should also provide the mode and manner of payment and the liability which is being discharged upon payment of such consideration.
- Liability of Settling Defendants is determined: The Mary Carter Agreement should pre-determined the rights of the parties to the agreement. It should be fixed beforehand only, and no adverse possession can be given to the plaintiff over defendants property in case of non- payment of the amount.
- Owner’s/Plaintiff’s Right to sue the remaining defendant: The Mary Carter Agreement should be made in such a way as to not hamper the rights of the plaintiff to sue the remaining non-settling defendants.
- Execution of Agreement: The agreement should also provide details about the way in which the agreement will be executed. It should provide the details of the mode, time, and venue of execution of the Mary Carter Agreement.
- Governing Laws: This agreement should clearly lay down the governing law to the Agreement. This is the law which will bind both the parties to the agreement.
How to Draft Mary Carter Agreement-Points to Be Considered
Following important points are to be considered while drafting a Mary Carter Agreement:
- Details of Parties: The details of both the plaintiff and the settling defendant should be disclosed in the agreement. It should provide who the plaintiff is and the details of all the defendants.
- Date of commencement of Agreement: The Agreement should also contain the date on which such agreement should be commenced.
- A Claim of Plaintiff: This agreement also needs to provide the claim for which plaintiff will sue the defendants. The amount for which trial is going on is to be provided in the Mary Carter Agreement.
- Liability of Plaintiff and defendant: The Agreement should also lay down the liabilities of both the plaintiff and defendant to the agreement. The Plaintiff is entitled to sue for damages. The defendant cannot be sued for any other amount than whatever is agreed between the parties.
- Applicable Laws: The Agreement should also provide details of laws which will be applicable to the parties.
- Signature of Witnesses: The Agreement should also contain the signature of witnesses which will make the agreement binding upon the parties.
- Execution of Agreement: The Mary Carter Agreement should also provide for mode and way of execution of Agreement.
Following negotiation strategies to be kept in mind while entering into a Mary Carter Agreement:
- Consideration: While computing the consideration to be paid by the settling defendants, the parties should weigh all the probable benefits and losses of each other and decide the amount to be paid.
- Rights available to defendants: While entering into Mary Carter Agreement, the parties should decide priory what are the liabilities which will be waived off by taking recourse to such agreement. For example, the settling defendant cannot be made liable for damages to the suit; however, settling defendants can make non-settling defendants liable.
- Plaintiff rights: The rights of the plaintiff is to be negotiated in such a way that it should not waive off the right of the plaintiff to sue the non-settling defendants.
Benefits and Drawbacks of Mary Carter Agreements
- Fixed Liability: The Agreement provides for fixed liability of the parties. The extent of liability of settling defendants are fixed up to the extent agreed by the parties in the Mary Carter Agreement.
- Expeditious disposal of Litigation: The Mary Carter Agreement helps in expeditious disposal of the case because of settlement agreed between the parties. The agreement also leads to non-settling defendant reaching to the settlement as the liability of non-settling defendant increases.
- Expensive: The Agreement becomes expensive as the trial decided for less liability for the parties. The settling defendant, in that case, has to bear more burden than the non-settling defendant.
- Collusion: The possibility of parties entering into collusion is still present and might result in the loss to defendants. Such collusion needs to be curbed out.
What Happens in Case of Violation
Following remedies are available in case of breach of Mary Carter Agreement:
- Damages: In case of breach of contract, the parties may sue each other for damages suffered by the parties.
- Recession: The parties may rescind the contract in case the terms of the agreement is found to be breached by the party.
- Suit for full amount: In case of breach of the terms of a contract by settling, the plaintiff may sue for the entire value of a claim for which the suit is pending.
The Mary Carter Agreement is an effective way of speedy resolution of a dispute. It also limits the exposure of the defendant to limited liability. It is a partial settlement agreement which helps in reaching a goal. These agreements also provide an effective way to attract those who are unwilling to reach a settlement agreement. The agreement provides certainty of receipt of some amount to the dispute to the plaintiff. The Agreement also helps in disposal of a suit at the earliest.
Although Mary Carter Agreements are not commonly used, the parties need to be aware of the benefits and drawbacks of it in order to know what they are opting for. These type of agreement provides an attractive substitute to trial and can even be opted for in situations where a trial is about to begin.
While everyone promotes an alternate mode of dispute resolution, Mary Carter Agreement although an alternative mode but does not dissolve the dispute. The agreement does not put an end to the dispute but leaves the scope for end of the dispute by attracting even the non-settling defendants.