Drafting a Settlement Agreement

After parties resolve their claims, either before litigation or after a lawsuit has been filed, it is important that the settlement be memorialized in writing.  A settlement agreement ensures that the more specific terms of a settlement are stipulated and that everyone abides by the settlement. Depending on the circumstances, there are a few things parties should keep in mind when drafting a settlement agreement.

Payment Plan

Oftentimes, parties cannot pay the entire settlement amount all at once and must make payments over time.  When drafting a settlement agreement with such a structure, it is important that parties specify exactly how much must be paid and when the payments must be submitted.  Moreover, parties need to discuss how payment should be made and if there will be a grace period for making payments.  Sometimes, the paying party may be late in making settlement payments, and the parties need to discuss the consequences of making late payments or failing to pay under the settlement agreement altogether.  The more terms agreed to between the parties in writing, the more likely it is that the parties will avoid headaches about the terms of the settlement later on, and it is important to consider all details surrounding a payment plan.

Confidentiality

When drafting a settlement agreement, it is important to consider if a confidentiality provision is desired. Some parties do not wish for the terms of a settlement agreement to become public.  It may be thought that if other people know how much money for which a party settled a claim, this might incentivize more people to pursue claims against the settling party. Moreover, settlements can oftentimes be seen as an admission of guilt, even if a settlement agreement stipulates otherwise, so settling parties often wish that settlement agreements be kept private.

However, parties oftentimes have an interest in publicizing the terms of a settlement.  Some parties may wish to advertise the amount and terms of a settlement in order to show the success that the party had in pursuing a claim.  Moreover, many people implicitly believe that a party who receives money from a settlement was the right party to a dispute and advertising the terms of a settlement could help vindicate a cause for which a settling party was fighting.  In any case, if a confidentiality provision is included in a settlement agreement, it is important that parties discuss the consequences of revealing confidential information despite a confidentiality provision.  This can help ensure that individuals do not advertise the terms of a settlement outside of a short list of professionals such as lawyers, accountants, and other specified in the confidentiality provision.

Timing of Paperwork and Payments

There are sometimes a mistrust between people drafting a settlement agreement, so it is important that all parties detail how they will execute paperwork and make payments.  It is usually stipulated that litigation that has been initiated because of a dispute will be discontinued a certain amount of time after payment has cleared resolving a matter.  Sometimes, the parties wish to hold the money in escrow, such as in one of the attorneys’ trust accounts, so ensure that payment will clear and that the money will be released after all of the required payments are made.  Moreover, it is oftentimes agreed that no payments shall be made until a final settlement agreement has been drafting and fully executed by all parties.  Of course, parties also need to be prepared to discuss what happens if the necessary paperwork has not been executed according to schedule or a payment has not been made.  In some instances, court rules might apply to settlement agreement and provide independent consequences if parties do not execute the proper documents settling a claim in a certain timeframe.  As a result, it is important that individuals drafting a settlement agreement secure the services of counsel so they can ensure that all contractual and legal considerations are being evaluated.

Related Documents

When drafting a settlement agreement, it is oftentimes necessary to consider related documents that must be executed around the same time as the settlement agreement is signed. One such document is a confession of judgment.  This is a document entitling a party to immediately enter judgment against another party for a sum certain if the party defaults under the terms of a settlement agreement. It is oftentimes very difficult to refute a confession of judgment that has been entered, so parties need to use caution when negotiating this document. In addition, parties may also need to execute releases separate from the settlement agreement that more broadly discusses the settlement.  Such releases also need to be negotiated with care so that they conform to the wishes of the parties. Moreover, parties may need to execute bills of sale, transfer agreements, and other documents depending on the circumstance. An experienced attorney should know which documents need to be executed to fully resolve a given matter.

The Rothman Law Firm has substantial experience drafting a settlement agreement whether the matter has been pursued in litigation or the parties are trying to resolve their claims before a lawsuit has been filed. If you are looking for an experienced New York and New Jersey attorney to handle your settlement agreement or other legal issues, please feel free to contact The Rothman Law Firm to request a free consultation.