What is a Final Settlement?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 23 February 2020
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A final settlement is an agreement which closes a case and ensures that it cannot be brought up again. The final settlement may be reached in a court with the agreement of all parties, or parties may reach an out of court settlement with the assistance of lawyers. As the term implies, a final settlement is final. Once all parties have agreed, the case is finished. For this reason, people should exercise care before agreeing to a final settlement to ensure that their interests are fairly represented and to avoid a situation in which issues arise later and cannot be litigated or resolved because the case is closed.

Several characteristics distinguish a final settlement. The first is an agreement from both parties to decline to pursue further legal action, including reopening or appealing the case, even if additional information surfaces. By signing the agreement, the parties agree that there is no further claim and that the agreement resolves the case to the satisfaction of everyone.

Certain confessions and admissions may be made in a final settlement, although usually it is stated that neither side is at fault. The settlement also prescribes a course of action for one or both sides, such as paying damages or engaging in a particular activity. As long as both parties follow through on their part of the deal, the matter is decided and cannot be brought up in court again.


An example of a final settlement might be a case in which a car insurance company offers a payout to settle the expense of replacing a car and providing medical care to someone involved in an accident. If the person believes that the settlement is fair, she or he can agree and will receive a lump sum. The insurance company is absolved from further responsibility in the case in exchange for providing the final payout. This means that if the person later develops a medical issue because of the accident, she or he cannot sue the insurance company for more money.

When a final settlement is offered, it should be reviewed carefully. If one side is exerting pressure, it can be a sign that it is hoping to force an agreement in a hurry, and special care should be taken because there may be a reason a party wants to be absolved of any additional duty as quickly as possible. The final settlement's terms should also be very clear. A lawyer can review the documents and provide a recommendation about whether to accept the settlement, to try and negotiate a better deal, or to return to court.

Courts often encourage people to reach and agree upon a final settlement because this reduces clogging in the judicial system by eliminating cases.


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