A settlement agreement is a legal contract that resolves the disputes among all parties by coming to an agreement. It is a legal document where all parties in a court case, in civil law, agree to an outcome of any judgment being made in advance. 

Usually, in settlement agreements, there is no need for a long court case which saves the clients both time and money. Settlement agreements are formed through mediation rather than through a trial. However, the judge will ultimately make the decision to approve the settlement after one is reached. Settlement agreements allow all parties to be hard and be satisfied with the outcome. 

It is important to note that there are certain legal requirements for this type of contract. In general, for a settlement agreement to be valid, it must be in writing and must contain the following terms:

  • An offer, which is what one party promises to complete; 
  • The acceptance of the terms of the offer by the other party; 
  • There needs to be valid consideration on both sides, which can be any tangible item of value or intangible benefit as long as it is reasonable and offered without any coercion; 
  • There has to be mutual assent among the parties, which means both parties agree without coercion and; 
  • It must have a legal purpose. 

However, you would need to confirm these regulations with the current local state laws to ensure that the terms of the agreement are in compliance. 

What is the Purpose of a Settlement Agreement?

If you are contemplating a way to settle your dispute without having to go to court, drafting a settlement agreement may be one of your legal options. With this type of agreement, one party must complete an action or pay a certain amount in exchange for the other party’s promise to stop legal proceedings. Here are some situations in which a settlement agreement can apply: 

  • Any property damage claim; 
  • Employment disputes; 
  • Marital issues and; 
  • Medical malpractice

With any settlement agreement, there first needs to be negotiations in order to agree on certain provisions. A mediator is useful to agree on a factual account of the situation if necessary. In some corporate settlements, one party may only agree to settle if no wrongdoing or liability must be admitted. Some settlement agreements may also have conditions, such as how long a party has to fulfill his or her contractual obligations. Therefore, you must agree on whether all current and future claims are resolved by this agreement or whether it fulfills only a single claim or lawsuit.

How Can You Prepare for a Successful Settlement Agreement?

Understanding the potential terms and researching them will get you ahead in the settlement agreement process. You can start by looking at any terms that would assist the case in the mediation process. 

For example, an insured claim being resolved by settlement agreement usually involves payment in exchange for release of legal liability. For these cases, a minimum of preparation requires consideration of whether payment will be made as a lump sum or in a series of payments. In addition, the scope of the claims being asserted and any releases must be considered. 

Moreover, drafting a successful settlement agreement can be challenging and seeking consultation from a settlement attorney may be useful. Generally, you need to identify the parties that will be signing the agreement and determine if they have the necessary legal authority to do so. It is important to include a factual description of the dispute that has been agreed on by both parties. This should include all relevant details to ensure there are no disputes regarding the facts. The agreement should also describe the scope of claims it covers. This could include all future claims and current claims or it can be limited only to specific claims.

Having clear language about the conditions of the settlement, particularly in a conditional agreement in which the action in question requires effort and time. Furthermore, including  whether the settlement agreement is confidential can be useful. If litigation is ongoing, the agreement must admit a clause dismissing the specific pending lawsuit.The settlement agreement should have a space for each party’s signature and the date. Once both parties have come to an agreement on a draft settlement, you can opt to submit it to the court for approval.

How are Settlement Agreements Enforced? 

The courts have the authority to enforce settlement agreements between the parties in the case. A settlement agreement once signed by the relevant parties it is a legally binding contract if all the terms are deemed valid. But it is important to note that courts do not have inherent power to enforce settlement agreements after a case has been dismissed. 

The court may adopt the agreement and incorporate it into a judgment or decree, however the court cannot add substantive terms to the agreement. The court must accept the terms on which the parties have settled their dispute. The court’s obligation is to construe and enforce contracts as made, not to make them for the parties. 

The enforceability is always a question for the court and it depends what is favored under the law in the state. The agreement is interpreted under the rules of contract construction. The parties may request an evidentiary hearing if there is a dispute issue of fact. 

A court order or judgement is easier to enforce than a contract. There are different types of releases for different situations. If you need a general release or a specialized release that can be used for auto accidents, property damage, and personal injuries. In general it is helpful to include a statement of what the party is giving up a claim receiving in return, meaning there must be adequate consideration. 

Furthermore, there needs to be a statement that shows that the release applies to all claims arising from the dispute or issue, both those known at the time the release is signed and those that may occur in the future. These statements are legally binding after the necessary parties have signed the document. Legally, only the person granting a release needs to sign it, but it is a better practice for both parties to do because this important document contains terms and conditions that affect the rights of both parties.

 Lastly, it is recommended to utilize witnesses for signatures to strengthen the document. It creates a legally enforceable document that will be more difficult to challenge in court, especially if there is a high risk or a large claim involved. However, there is no legal requirement for a release to be witnessed.

Do I need a Settlement Agreement Lawyer?

Creating effective settlement agreements prevents delays, and expenses of lawsuits into solutions that the parties choose for themselves. The drafting of a well written, binding, enforceable settlement agreement requires a great amount of attention, time, and energy. 

If you are spending all that time drafting a settlement agreement it is important to follow the necessary state guidelines to ensure that it is enforceable under the state law. Failure to do so can create liability for you and the other party. Therefore, seeking an experienced local attorney dealing with settlement agreements may be useful for your next case.