Settlement Agreement

What is a settlement agreement?

A settlement agreement is a legally binding contract that aims to resolve a dispute between the parties without continuing a trial. This document sets up a clear legal framework regarding the settlement of all legal claims and release of liability. A settlement agreement template is a voluntary document between both parties who wish to end the dispute amicably.

A simple settlement agreement sample includes:

• identification details of both parties (full name, address, and contact details);
• reason for the dispute;
• cause of action;
• settlement amount;
• statement about the release of all claims; and
• general provisions (e.g., applicable law, severability, etc.).

The parties involved in a settlement agreement are a complainant and a defendant. A complainant is an individual or a legal entity who filed a lawsuit. In practice a complainant is being referred to as a plaintiff as well. A defendant or a respondent is another party against whom the claim was brought.

Parties should not necessarily be in contractual relations to be able to file a lawsuit against each other. The dispute may arise from personal injury claims from accidents or negligence, estate disputes, cases of harassment or defamation, etc.

The key purpose of a settlement agreement is to release a defendant from all claims and liability permanently in exchange for the paid settlement or compensation amount. The parties can enter this agreement at any time before a court adopts a final decision.

How to draft a settlement agreement template?

There are no sets of binding rules according to which a settlement agreement template should be drafted. However, inclusion of certain elements is essential to ensure a document’s clarity and legal validity.

Details of the Lawsuit

Every sample settlement and release agreement starts with a description of the existing lawsuit. The description shall include:

• the name of a court to which the lawsuit was filed;
• the name of a court case assigned (e.g., Johnson v. Johnson)
• the unique identification number of the case;
• detailed description of the case’s factsheet; and
• reason for the lawsuit (e.g., unpaid rent, moral compensation).

Settlement Amount and Payment Schedule

This document is being widely referred to as a payment settlement agreement sample as well. This is so because a claimant receives a mandatory compensation for ‘closing’ the dispute. A compensation should be a fixed amount that is being paid:

• as a lump sum; or
• in separate installments according to the agreed schedule.

Parties should also discuss how additional expenses, including attorney’s fees, shall be allocated between them. Apart from that, the text of a settlement agreement must define the list of acceptable payment methods a defendant can use.

Finally, a complainant and a defendant must decide to whom a settlement amount should be paid—directly to a complainant or to a complainant’s attorney. If an attorney shall be the recipient of funds, in that case the text of a document shall also define the full name and contact details of such an attorney.

Release of Claims

The core element of every sample settlement agreement is the clause about the release of the defendant from all known and unknown claims arising out of the dispute.

Such a release applies not only to a defendant but to all his agents, employees, and successors.

No Admission of Liability

The main purpose of a sample settlement and release agreement is to stop the lawsuit and mitigate a conflict in an amicable way by paying a final settlement. The fact of signing the present agreement does not make either party liable for any offense or acceptance of wrongdoing. The mere purpose of this template is to avoid further expenses, as well as to limit a legal uncertainty.

Additional Terms

The parties to a settlement and release agreement template may include a number of additional terms, for example:

• Confidentiality Clause. By virtue of this clause, either party undertakes to not disclose any information about the terms and conditions of this agreement for a specified period of time.
• Non-Suit Clause. This is when parties promise each other to not sue again and withdraw all legal claims.
• Attorney’s Fees Coverage. Parties may wish to decide who shall be responsible for covering attorney’s and legal costs incurred during the lawsuit. In most of the cases, parties split up in equal parts the legal expenses. However, it is also possible to make a defendant responsible for paying for those expenses in full.

Applicable Law Clause

Even a simple settlement agreement sample should contain a clause about the applicable law. This is a law of a state that shall apply to the application, interpretation, and modification of the present agreement.

The parties are free to select any state they prefer. However, the most common options would be the following:

• a state where the lawsuit has been filed;
• a state where either party is located or based; or
• a state the laws of which apply to the provision of an original agreement between the parties.

How to customize a settlement agreement at FasterDraft?

To make a fully personalized legal document template, follow a few easy steps below:

1. Click the “Create Document” button.
2. Answer simple questions in the form.
3. Select a template’s format—settlement agreement template Word or PDF.
4. Make a payment.
5. Download, print, and sign a document.