When parties in a dispute agree to settle their claims they typically enter into a settlement agreement. Parties can enter into a settlement agreement whether they are in litigation or not and the terms will be enforceable as a contract. A settlement agreement should be in writing and signed by all parties to the dispute so that everyone understands the terms of the agreement and agree to be bound by it.
Common terms and provisions found in a settlement agreement include:
Recitals. A settlement agreement usually has recitals, which include some of the facts and circumstances involved in the dispute, the caption of the lawsuit (if the dispute is in litigation) and a statement that the parties have reached a settlement.
Settlement Terms. A settlement agreement will include the terms of the settlement, including any amount of money that will be paid, payment terms, and any other terms specifically agreed upon by the parties.
Release. A settlement agreement usually contains a general release of all known and unknown claims through the date that the release is signed by the parties. It typically includes any claims relating to the dispute between the parties and can either be unilateral, meaning one party is releasing the other, or mutual, where all parties agree to release each other from any and all claims up through and including the date of the release.
Confidentiality and Non-Disclosure. A confidentiality clause is commonly found in a settlement agreement. The parties typically agree to keep the terms of the settlement agreement confidential and that they can only be disclosed if disclosure is ordered by law or by court order. The parties can also agree to use certain language if asked about the settlement agreement, such as “the dispute was resolved” or other generic language.
Non-Disparagement. Many times the parties will agree to a mutual non-disparagement clause whereby they agree not to say anything negative about the other going forward. No Admission of Liability. If the parties are entering into a settlement, it is typical for neither side to admit fault or liability. A settlement agreement will commonly state that neither party admits any liability or responsibility for any of the alleged actions or wrongdoing that are the subject of the dispute.
Breach. A settlement agreement will typically contain a provision stating that although the parties are agreeing to release each other from claims relating to the subject matter of the dispute, the parties reserve the right to sue for enforcement of the terms of the settlement agreement. As set forth herein, a settlement agreement is a contract between the parties so if one party breaches the agreement, the other party can sue for breach of the agreement.
The terms of a settlement agreement will depend on the facts and circumstances surrounding each case, but the terms discussed here are common. A party should certainly consult with their attorney before signing a settlement agreement so that they understand what the terms are and what they can and cannot do moving forward.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.
