Settlement Agreements Explained
A settlement agreement is a legally binding contract between parties that resolves a dispute and usually involves the giving up of a legal right or claim to settle a disagreement outside of the court system. While the context in which it is used can vary widely, the elements of a settlement exist usually consist of the agreement to not pursue further legal action, the payment or compensation (if any) and an agreement that neither party will disclose the terms of the agreement. Settlement agreements can involve anything from the settlement of debt, workplace disputes with employers, litigation settlements or disputes over trusts or inheritance . A settlement agreement should be drafted according to the specific circumstances of the dispute, however, there are essential details that every settlement agreement must include such as the names of the parties involved, the specifics of the dispute and an issue and an indication of whether the other parties have received sufficient consideration or not. When drafted correctly, a settlement agreement can execute the release of all claims and provide closure for all parties, however, if done incorrectly it can trigger unwanted consequences. Therefore, it is often advisable to consult a lawyer for assistance in drafting a settlement agreement in order to avoid the unforeseen.
Advantages of a Free Template
The most significant advantage when it comes to using a free settlement agreement template is that it is available for download online, anywhere you have internet access, at any time convenient to you. You simply search the words "free settlement agreement template" in a search engine and you’ll be sure to find a plethora of results with no cost attached. Some of these templates are better than others, however, and even the best ones sometimes require some tweaking to fit your needs exactly so you don’t want to spend more time choosing one than you have to. Before settling on a template, consider its contents in relation to your circumstances. For example, if the matter settled is employment-related, you can use the search phrase "free employment settlement agreement template" for more targeted results. You’ll usually have choices from a number of sources so you can select the right template for you.
A free settlement agreement template saves you money because you don’t pay a fee for the text, but you will have to pay an attorney if you want to sue someone if you can’t reach a settlement agreement after using a free template to prepare your text. Also, while the template is free, you will have to pay an attorney to review your text before you present it to the other party as part of the negotiation process or before you file your lawsuit to ensure your settlement agreement is enforceable under the law and you don’t waste a lot of time by having to redo your work to comply with the law.
Elements of a Settlement Agreement
A settlement agreement is considered to be binding once signed by both parties. A settlement agreement should contain the legally required terms for enforceability. Some of these can include:
Name(s) and status of the signatory parties (i.e. living trust, LLC, corporation, Robert Smith, trustee, 21 years of age);
Name(s) of the parties’ attorneys (if any);
The specific facts and circumstances that gave rise to the dispute;
Statement of facts related to the Resolution of the dispute;
Release of current and future claims by both parties and their legal representatives;
Payment(s) and time frames for such;
Confidentiality terms (if applicable);
Terms of dismissal (if relevant); and
Applicable law/jurisdiction and venue.
Editing Your Template
The beauty of templates lies in their flexibility and adaptability; they serve as a skeleton that can be altered to fit your unique situation and legal requirements. When choosing a free settlement agreement template, consider the following elements that might require modification to meet your specific circumstances:
- Parties Involved: While the template will typically have placeholder names, you will need to fill in the correct legal parties – people or companies involved in the dispute. Be sure to correctly identify them, including their current address and contact information.
- Terms of the Agreement: The agreement should include customizable sections where you can insert specific actions, considerations, and payments required. This could refer to the delivery of property, payment of a sum of money, or any other terms agreed upon during the dispute resolution process.
- Additional Clauses: Many templates contain miscellaneous clauses – these could be clauses pertaining to confidentiality, indemnity, non-hire of employees, or attorney’s fees. Some of this may or may not apply to your situation and will need modification. Speak to your attorney to make necessary adjustments.
- Governing Law: If the agreement is between parties from different jurisdictions, you may need to specify which state or country’s laws will govern the agreement.
- Signatures: While there will be prompts within the template for parties to their settlement agreement to sign, it would be useful to add date fields so each party can provide the date they have signed.
- Miscellaneous: There may be other particular sections in an agreement that you feel need changes. An example is in the event of a dispute—this could be through some alternative form of dispute resolution or even with court proceedings.
Always remember to double-check your customized document for legal errors such as misnamed parties, wrong jurisdictions, or completing your template properly.
Legal Issues
Legal Considerations When Using a Free Settlement Agreement Template
If you’ve settled a case, that’s great — but don’t be in such a rush to put the conflict behind you that you neglect your paperwork. More important than finalizing settlement terms is putting them down in writing and having both parties sign the agreement. This ensures that everyone is on the same page regarding the terms and conditions of the settlement and avoids misunderstandings down the road.
A well-drafted settlement agreement will cover all the outstanding issues between the parties. While the agreement may be related to a lawsuit that has been filed, it doesn’t have to be if the parties simply wish to cooperate with one another and avoid costly litigation. Often, it’s preferable not to link a settlement agreement with a lawsuit. In such cases, the emphasis can be on resolving the issues and moving forward instead of obligating the parties to the language of the law.
Even if the lawsuit is still pending, you may want to draw up a separate settlement agreement. This has the advantage of allowing you to dispose of the case without all the elements of a court order or judgment, such as appeal or enforcement. But be careful that you cannot be required to reopen the case unless that is your intent (for instance, for later enforcement).
As to what the agreement will contain, the legal issues that need to be covered in the document will depend largely on the type of case and the settlement terms . Keep in mind that under federal labor law, FLSA claims for unpaid minimum wage or overtime are not subject to settlement prior to a judgment unless the settlement is reached under supervision or approval of the DOL or a federal court. Only rarely does a court hold a FLSA settlement enforceable outside of these circumstances. However, state laws differ and, where applicable, statutes of limitations vary depending on the underlying claim. For instance, while an employer may remain obligated to pay back pay and benefits per a settlement agreement, the employee’s recovery from a wrongful termination claim may be non-economic, such as emotional distress, and therefore have no monetary value. If the case is a wrongful termination case, the agreement may therefore limit the period covered by back pay and benefits (such as insurance premiums) to three months or six months before the date of the signing of the agreement — the length of coverage will vary depending on whether the employee is more likely to find replacement employment within three or six months, for example.
Also, be sure that the agreement contains a release of any and all claims, including those that the parties are not yet aware of or think to ask about. In some cases, such as FLSA solutions, the parties will also want to contain a "waiver of prejudice" clause which prevents either party from reviving claims under a theory of immunity from continued reporting or record-keeping responsibility.
How to Finalize an Agreement
The process to finalize the agreement is fairly simple. First, the parties or their attorneys can sit down and start drafting the outline of the agreement. Topics should include items such as child custody arrangements, the division of marital property, alimony or spousal support provisions, premises for which parent the child will reside, payment and child support or other various issues. Once the rough drafts are complete it is best to have a neutral third party review and make suggestions of what issues can be resolved and what issues remain. Another attorney, counselor or friend may fulfill this role. Many times the mediator will identify the most important issues and provide some suggestions or solutions for the parties to consider. Once the parties draft a final agreement, it is best to have the agreement reviewed by an attorney if the agreement concerns a divorce, or other legal issue. It is very likely that this agreement will not be able to be modified by a court at a later time. Therefore, it protects the parties to have an attorney review the agreement prior to signing to ensure that both parties understand their rights and the impact of the agreement.
Once the agreement is agreeable to both parties, it can be signed by the parties and filed with the court. At this time any marital termination agreements as well as demand for waiver of personal appearance can be filed with the court. Once filed, it becomes part of the case record and can be used if the parties later disagree. It is important to remember that a stipulation and order is only as enforceable as the willingness of each party to comply. If one of the parties does not abide by the agreement, then the parties will have to resort to litigation to enforce the agreement.
After a stipulated and executed agreement has been filed with the court, the parties will simply wait until the time for the dissolution hearing. The court will schedule a date for the hearing and once the judge confirms that the parties have reached an agreement, the court will incorporate the stipulation or marital termination agreement into an order. At this hearing the parties will also have an opportunity to get in front of a judge and present any issues that must be finalized.
Avoid Common Pitfalls
Waiving rights you shouldn’t. Attorneys are able to waive the right to sue on an individual basis, but not on a class basis unless conditions have been met, like a settlement has been approved. In other words, a defendant cannot settle one case and force all potential cases to be resolved just because one has been settled. The right to a jury trial or to a peaceful existence is one that a party should never waive.
Forgetting the general standard language. There is standard language that must be in every release-something that says that if you’ve thought of something that you’re releasing it, or if it’s a matter that you’re settling, even though it wasn’t specifically mentioned, you’re giving it up. Many a company has required a release without thinking about whether fraudulent behavior was involved; for example, if a salesman made a promise to a consumer that was a misrepresentation, the general standard language will release that misrepresentation-unless it is omitted.
Waiver of present and future claims. Without being specific, a waiver might be written too broadly. For example, if the employee intends to protect the company against future wage and hour claims, it should be written in the language of the statute, which could be reasonably construed to apply to future wage and hour claims. If it’s written generally, it could be construed to include a personal injury statute.
Leave the Court out of the settlement. If that settlement agreement includes a release of a claim for employment, the person on the receiving end can object. If it’s an Age Discrimination Employment Act (ADEA) case, there are certain statutory requirements. A release cannot be just between an employer and maybe an employee because there is still the possibility of coming forward with information on the claim. Generally speaking, an ADEA release is not enforceable unless the EEOC is a party. Specific remedies make sense when there is a claim pending, and when there is knowledge obtained because the EEOC is investigating, so a waiver of present and future claims in an administrative fashion is essential.
Materials and Further Information
This free database contains sample settlement agreements, including those tailored to real estate disputes and other specified areas of law. While these sample agreements can provide a valuable starting point, they should be modified to reflect the unique facts and circumstances of each individual case. Importantly, templates are only a guide and are not a substitute for independent legal advice before signing.
Westlaw is a comprehensive commercial database offering a wide selection of settlement agreement templates on a subscription basis. Sample agreements available through Westlaw include those for non-compete agreements, laws governing the individual states, as well as databases sorted by type of dispute, such as intellectual property and environmental.
The American Bar Association (ABA) provides a general settlement agreement template that can be used as is, or as a starting point to be customized. The ABA’s template is free to use, but does require a free account to play to download and access it.
Legaldocs.co . in is a subscription-based database of settlement agreement templates for use in India. Templates are available for a wide range of individual needs, including for agreements between separating individuals, employee-employer disputes, landlord-tenant disputes and more. The Indian settlement agreement templates available through this website should only be used for legal matters arising under the laws of India.
Many counties and municipalities provide commercial databases containing both general and specific settlement agreement templates. These templates are typically affordable and searchable, but may not be as comprehensive as some of the other databases available. An example is the Sample Legal Solutions website, which provides over thirty sample settlement agreement templates for only $27.94.
Also, there are many companies and individuals that offer professional help with creating a settlement agreement, and some of these companies include useful resources and samples to provide additional guidance. Legal Templates is one of these resources, and costs $11.85 per month to join.