What is a Settlement Agreement?

A settlement agreement is a legal document which spells out the terms of a settlement. It is reviewed by all the parties to the settlement to ensure that the document is comprehensive and accurate, and once the parties sign it, it becomes a legal contract. Such agreements are most commonly seen in civil cases, such as divorces or lawsuits, and they are a very useful legal tool.

When people contemplate legal action, they can opt to settle, which means that they reach an agreement before adjudication takes place. In the most radical example of a settlement, an agreement might be reached before the case even comes to the attention of the court, as in the case of a company threatened with a lawsuit which wants to keep its name out of the news. At other times, court proceedings may be initiated, but the parties in the suit may reach an agreement and withdraw the case from the court.

The settlement agreement discusses the terms for all parties involved. In the example of a product liability suit against a company, for instance, the consumer would be given a cash payment in exchange for agreeing not to sue the company. He or she might also have to sign a confidentiality cause as part of the agreement, making it so that the consumer would not be allowed to bring the issue up in public and allowing the company could protect its reputation.

Divorce settlement agreements usually contain terms about the division of real estate, personal property, and other goods. In divorces where children are involved, the agreement can include terms about custody, shared expenses, and other issues which may come up in regards to the children. Mediators and lawyers may work together on a divorce settlement agreement to make it as effective and amicable as possible, and to avoid the expense of taking the proceedings to court.

When someone is offered a settlement agreement, he or she should ask for a copy and take it home. The agreement should be reviewed carefully, and it should also be brought to at least one lawyer for review and discussion. If any terms of the agreement are not satisfactory, or are unclear, the agreement should be renegotiated. People should remember that a settlement agreement is hard to impossible to alter after the fact, so anything which might be a problem needs to be addressed at the time, not put off until later.

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Post 4

@Mammmood - I don’t view it as an admission of guilt at all; it’s just an admission that a long, drawn out court trial is a hassle.

If both parties know what each side wants, they can settle and get on with their private lives. It’s more about convenience, not guilt.

Post 3

@hamje32 - I see your point. I do view settlements as an admission of guilt of some sort-or else why would you settle?

OK, maybe a company doesn’t want its name in the news over a lawsuit, but if it’s a frivolous suit then it should have nothing to lose. The court case would make a spectacle of the other party and the company would get off clean.

Post 2

@MrMoody - I think settlements are common in lawsuits where one party is suing for an outrageous sum of money. Someone may sue a company for $20,000,000 or something like that, and the company turns around and says, “If I give you $2,000,000 now and you never sue us again, would that work?”

Let’s face it. Most of us would take the cash now, unless we were sure that our case was bullet proof and we could afford to slog out a long court trial.

Post 1

Anytime I hear about two parties in a case choosing a settlement agree instead of going to court, I ask myself, was this a mutually beneficial compromise, or did one party in particular stand to lose something so great they couldn’t afford a court trial?

The thing about settlements is that you never really know the answer to that question-who was or was not really guilty? You just know that one party or another was made happy by an offer of money, or some other part of the deal, proving the age-old adage: “Money answers all things.”

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