Often I get phone calls where a potential clients wants to share with me a conversation that they had with a party they are involved in a dispute with.  Sometimes, the conversation which is being recounted to me sounds as though it was in the context of settlement.  An analysis must then to be done as to what extent, if at all, the conversation might be admissible in a courtroom one day.

North Carolina Rule of Evidence 408 provides, “Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or evidence of statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.”

As you can see, not all statements made in the course of discussing a disputed claim are admissible, nor are all such statements excluded.  An example of a statement likely to be excluded in the context of a disputed lien claim might look something like this.  General contractor to subcontractor: “Your invoice was for $18,000.00 and we are having a hard time getting paid by the developer. They have raised some issues with your work.  If you will take $15,000.00 we can have you paid within a week.”  The statement by the general contractor is likely offering valuable consideration in compromising or attempting to comprise a claim which was disputed as to validity or amount.  It would therefore likely be inadmissible if the subcontractor decided to pursue litigation.

An example of something not rendered inadmissible would be if the general contractor’s statement went on to say, “We show that you installed 850 pieces of drywall.”  The admission by the general contractor that the sub-contractor had completed a certain amount of work, would likely not be rendered inadmissible simply because it was made during the course of a settlement discussion.

What should be clear, and may sound obvious, is that you should be cautious in what you say to someone you are having a dispute with.  It may or may not come into evidence, and reasonable people can disagree about issues of admissibility. Public policy favors free and open settlement discussions such that parties are not dissuaded from resolving claims without litigation.  However, Rule 408 of the North Carolina Rules of Evidence certainly has its limits.  If you are considering making a settlement offer, or otherwise entering into settlement discussions about a disputed claim, it would likely be in your best interest to work with a lawyer experienced with negotiations so that you do not harm your position in the event settlement discussions break down.  The lawyers at Vann Attorneys would be happy to discuss how to make a properly protected settlement offer with you.