What is a Settlement Agreement?

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A settlement agreement usually has two main parts.  First, it should include a waiver of legal liability for disputes arising out of the same issue.  This provides protection for the parties from a lawsuit over the same issue in the future.  Second, it should contain some transfer of assets or rights in exchange for waiving the right to sue.  This transfer will often be based upon what the wronged party might expect to win if the issue were litigated in court, but will usually be reduced by a fair amount to reflect the time and expense saved by not litigating the issue.

Because settlement agreements are entered into freely by the parties, they can often contain more creative solutions than a court might provide.  For example, payment may be made in installments over time or a license to intellectual property may be transferred rather than money.  Furthermore, unlike litigation, settlement agreements can also include confidentiality clauses that prevent both parties from talking about the settlement agreement or what was transferred.  This can be important for businesses that wish to protect their public image to prevent the media from picking up on the details of the settlement.

If you have any questions about a potential breach of contract, please contact our office for a legal consultation.