Settlement Agreement Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Settlement Agreement, written in plain English, along with examples of how it is used.

What is Settlement Agreement?

A contractual resolution to a disagreement between two parties without going to court.

History and Meaning of Settlement Agreement

A settlement agreement, also known as a compromise agreement or a release agreement, is an agreement between two parties to end a dispute or a legal issue outside of court. Typically, this agreement is reached through negotiation, and results in the parties agreeing on specific terms and actions to resolve their dispute.

Settlement agreements are common in a variety of situations, including employment disputes, personal injury cases, and contract disagreements. They are often used as a way to avoid costly and time-consuming legal battles and can provide both parties with some level of closure and satisfaction.

Examples of Settlement Agreement

  1. In an employment dispute, an employee who has been terminated may negotiate a settlement agreement with their employer that includes severance pay and a positive reference in exchange for agreeing not to pursue legal action.
  2. In a personal injury lawsuit, the plaintiff may agree to a settlement agreement that provides them with a specific amount of monetary compensation in exchange for dropping the lawsuit and not pursuing any further legal action.
  3. In a contract dispute, the parties may agree to a settlement agreement that outlines the terms of their resolution, including any financial compensation or changes to the original contract.

Legal Terms Similar to Settlement Agreement

  1. Consent decree: a type of settlement agreement that is approved by a court and has the same legal weight as a court order.
  2. Release agreement: a legal agreement in which one party agrees to release the other from any claims or liabilities.
  3. Arbitration agreement: a legal agreement in which parties agree to use arbitration to resolve their dispute instead of going to court.