A settlement agreement (in the non-employment context) is a document that parties can use if they have settled a civil (not criminal) dispute.
A settlement can be documented in many forms (letter or exchange of emails for example) but a settlement agreement seeks to ensure that parties are clear on the terms of the settlement and avoids confusion. Using a worked example:
Party A might say to party B that they will settle a dispute by paying them £100 by 31 December. If party B says they will accept the £100 but by 30 October that will not be an acceptance of party A’s offer. This is due to contract law principles (there has not been an acceptance of the offer put forward). Therefore, party B would have made what is known as a counteroffer. If the parties do not properly document this settlement, there could be confusion on what the obligations of the parties are (in particular concerning when the settlement sum is due to be paid).
A settlement agreement (signed by all relevant parties) can set out the requirements of the parties clearly and will more than likely provide that any prior discussions will not be taken into account – this makes the settlement certain and clear by encompassing it in one document.
Another benefit of a settlement agreement is that if any party to the settlement defaults (doesn’t do what is required to settle the dispute- for instance fails to pay the settlement sum), the settlement agreement is a contract and the ‘innocent’ party can rely upon it to enforce the settlement obligations.
The settlement agreement is also a useful document to seek to prevent any further action being taken in a dispute (for instance drafting can be inserted to stay (cease) existing proceedings and to encourage the parties to agree not to pursue any litigation in connection with the dispute in the future)).
Settlement agreements require specialist knowledge and legal advice – contact SHU Law on 0114 225 6666 / 0114 225 5891 for help in resolving a dispute.