How to Write a Settlement Agreement to Resolve a Dispute

How To Write A Settlement Agreement

Before learning how to write this document, let’s talk about what it is. In a nutshell, this is a binding contract between the involved parties after negotiations were made. The agreement is made before a final judgment is made to resolve a legal dispute. 

The parties involved in the dispute need to have already come upon a mutual agreement that a judge simply needs to approve. Here is what you need to write this agreement. 

1. Write a header

First of all, you’ll need to include a header to the legal document. It is usually a simple line that reads “Compromise Agreement Between X and Y” or “Settlement Agreement Between X and Y”. 

“X and Y” refers to the names and addresses of the parties involved in the dispute. You can also include the date when the agreement was executed. 

2. Identify the legal purpose

When you’re writing a settlement agreement, make sure to include both the agreement’s intent and reason. Since the document aims to settle a dispute between both parties, it should detail the purpose and resolution. 

For example, with a marriage settlement contract, a legal agreement needs to be reached surrounding a divorce’s terms and conditions. Meanwhile, if you have a business settlement, it should seek to rectify damages and minimize harm. 

3. Discuss the offer

For the document to be legally binding, it should propose a possible resolution for the dispute. In this case, it will require a succeeding document known as a release of future liability. 

When the parties have agreed to end their dispute, this requires settling on mutual terms through the document. But before this happens, a resolution should be proposed and extended to the other party. 

A negotiation between the involved parties will then follow before a resolution is agreed upon. 

4. Share details of the terms of acceptance

Once a party has made a settlement proposal, the other party needs to review the offer. If they are unhappy with the offer, they can counter it with their own. 

Usually, a settlement negotiation will take time. It also involves a lengthy discussion between the parties until a mutually acceptable compromise can be made. 

When the terms are accepted by the parties involved, they can already reach a final settlement. In the case of a business trade, the payment must be made before the assets can be delivered.

5. Discuss valid considerations

In legal terms, consideration refers to something of equal value that is offered for resolution. Before the agreement can be approved by a judge, it needs to prove that a valid consideration was made. Additionally, the valid consideration should be free of coercion, intimidation, or duress. 

Every case and individual involves various considerations. They can come in the form of a material object, monetary compensation, or a promise not to pursue legal action. Consideration, however, should not be used to coerce or threaten the other party into settling with you. 

6. Include the mutual assent

When you’re drafting a settlement agreement, you need to remember to include the mutual assets from the involved parties. A mutual assent refers to mutual agreement. When you’re ready to submit the agreement to a judge, there should be no outstanding counters or disputes. 

This means that everything has already been agreed upon. The final offer and consideration should have already been agreed upon before meeting with a judge.

7. Affix your signatures

Lastly, the settlement agreement should include a signature from all the parties involved in the matter. Apart from their name, their position or title in the organization should be written in the agreement. The signature also needs to be dated.