What it is
A settlement agreement is used when parties to a dispute — commercial, contractual, employment-related or otherwise — reach an understanding on how to resolve it without continuing the dispute further, or as an alternative to pursuing it through a court-based process. It may follow direct negotiation, mediation, or discussions after a legal notice has been sent.
The agreement is generally intended to record, in writing, exactly what has been agreed, so that each party knows what is expected and the matter can be considered resolved once those steps are carried out.
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What it commonly contains
The specific content should be tailored to the dispute and what the parties have actually agreed, rather than reused from an unrelated matter.
- Identification of the parties and a brief background to the dispute.
- The terms agreed, such as payment amounts, deliverables or actions.
- Timing for performance of each obligation.
- How the matter is treated once the agreed terms are fulfilled.
- What happens if a party does not comply with the agreement.
- Signatures of the parties and the date of signing.
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Before you sign
- 1Check that every term matches what was actually discussed and agreed.
- 2Confirm amounts, dates and responsibilities are stated clearly and without ambiguity.
- 3Consider what should happen if the other party does not comply.
- 4Check whether the agreement is intended to resolve the whole dispute or only part of it.
- 5Keep a signed copy together with any documents referred to in it.
- 6Take advice if the dispute is significant or the terms are complex.