39+ Sample Settlement Agreement Templates

What is a Settlement Agreement?

Getting into a conflict with someone or an organization needs a lot of effort, time, and money to resolve. And sometimes, going to court can be stressful. That is why some individuals that have a dispute with someone tend to resolve it through settlement. One of the advantages of an agreement is that you can settle for what you think is acceptable. Another advantage of the arrangement is that it is much quicker than having it resolved in court. However, settling a dispute needs some important considerations that both parties should discuss. Hence, the settling parties must have a written settlement agreement on hand. A settlement agreement is a legally binding contract that outlines terms and conditions agreed by two or more parties. According to an article from the American Bar Association (ABA), settlements agreement are products of mediation. With this written agreement, parties in conflict will be able to turn misunderstandings to understandings and release them from the stress of the possibility of bringing the dispute to court.

According to the report from FINRA, of the 1278 closed cases in 2020, 15 percent of those cases were resolved through settlement or mediation.

In an article from courts.in.gov, 50 to 90 percent of filed cases in the United States are not resolved in courts but through settlements.

As stated in an article from Cornell University Law School, researcher H. Laurence Ross’ research finding states that 95.8 percent of automobile accident insurance claims settled.

What should a Settlement Agreement include?

A settlement agreement is a document that gives a lot of benefits to the parties involved in the dispute. It is a document that outlines the agreed conditions by the involved parties with the purpose of not the conflict to trial. With a settlement agreement, resolving the dispute is more fast and convenient. However, before you make one, you have to understand first what goes into the settlement agreement. In no particular order, here are some of the essential information that makes such an agreement.

The Parties Involved. Any contract, whether a business contract or personal, that stipulates the agreement of two individual should have the full information of the parties involved. Having this in the settlement agreement is important because it makes the document more valid. It is also helpful once a party failed to do his or her end of the bargain and he or she will be held accountable to the court.The Considerations. In some cases, considerations may refer to payments. For instance, a settlement agreement is written to end an employment contract. So, the employer and employee will discuss the termination payment in the settlement agreement. Considerations may also be a restriction of a party to enter a property. Basically, considerations may differ on what the dispute is.A Non-Disclosure Clause. A settlement agreement is a written contract between two or more parties. And disclosing the terms and conditions agreed by the involved individuals to an outside party may be a violation of one party’s rights. So, it is important to discuss terms and conditions regarding the confidentiality of the settlement agreement.Statement of Claims. Another important information that should be present in a settlement agreement is the statement of claims. Each party should highlight and identify the claims that will be settled under the agreement. This is essential so that both parties are well-aware of what is there to settle. It is also imperative to have no other pending claims statement in the settlement agreement.Dismissal of Litigation. A settlement agreement should outline proper information about the dismissal of the litigation. The agreement should highlight the grounds where the dismissal should take place, such as the time period once the settlement agreement is received. It is essential that the plaintiff and the defendant should discuss and agree about this information.

How to Write a Formal Settlement Agreement

According to an article from Medium, one of the main reasons why a settlement agreement takes into effect is to settle disputes or grievances between two parties, either employee-employer relationship or private parties. A settlement business agreement is a powerful and essential document that stipulates specific terms and conditions that both parties have agreed upon to avoid going through the judicial process. In an article from the American Bar Association (ABA), a settlement agreement the most effective possible to resolve litigation. With its essential purpose, it is only essential that a settlement contract be well-written and contain accurate information, regardless of its use. Below are some simple tips or instructions on how to write a formal and precise settlement agreement. Here’s how.

Step 1: Write the Introduction

Start making a settlement agreement by writing an introduction. The introduction must include what the agreement is all about and who it is for. The first paragraph in this section must outline the full names of the people involved and should define their roles. It is also necessary to include other information, such as addresses and content information. In the second paragraph, the settlement agreement should contain a brief overview of the purpose of the contract and the date when the deal is made.

Step 2: Enter Description of the Dispute

After identifying the parties and providing information about the settlement agreement, the next thing you need to do is to enter descriptions about the dispute. Writing this information is important because this will serve as a basis for what is being settled. For example, if you are ending a conflict within your working environment, you may write a scenario that the argument happened. Provide detailed information about the situation, who was there when it happened, and when and where it happened. Nevertheless, make sure to be as precise as possible and ensure to include all relevant information.

Step 3: Input Considerations

Once you have already stated what the dispute is, it is now time to input considerations that both parties have agreed upon. The considerations refer to the things or compensation that the other party will receive in return for withdrawing legal actions. Both parties can also decide to have a payment agreement. However, payments agreed in the contract may differ on the nature of the dispute. The bigger it is, the bigger the compensation should be. For instance, if the settlement agreement is to resolve a damaged property, the payment agreement may include the payment schedule and the amount. Regardless of what the considerations are, it is essential to outline each of them to make the settlement agreement valid and precise.

Step 4: Describe the Scope to Settle

Now that you have added a statement about the considerations, the next thing you need to do is to include a statement that describes the scope of the claims to settle. There are some cases that not all settlements will resolve all complaints in the dispute. That is why it is important to have this discussed with both parties to ensure accuracy. It is also essential to identify unknown and future claims that may arise so that both parties will be able to take action beforehand to avoid misunderstandings. So, in this part of the settlement agreement, it is necessary to describe and have a clear statement of the scope to settle.

Step 5: Determine if the Agreement is Confidential

Almost every contract agreements, especially those business agreements, are confidential. This is to make sure that both parties are protected. Hence, determining whether the settlement agreement is a confidential document and stating the confidentiality provision in the contract is necessary. The purpose of having this provision in the settlement agreement is to ensure that no one, from both parties, can discuss or reveal the agreed terms and conditions to outside individuals. This section may read as “The written terms and conditions in this settlement agreement are confidential between the involved parties and shall not be disclosed to anyone outside the agreement.” It is also essential to state the necessary actions to do once the termination of the contract takes place.

Step 6: Finalize with a Signature

Once you have already entered the essential information a settlement agreement should have, the final step that you should do is to get the deal signed. Prior to that, it is imperative to evaluate the settlement agreement to ensure that there are no errors in the content and format and that there is no missing information. It is also possible to have a lawyer check the agreement to make sure that every information written in the document is valid and follows the exact process. After that, you can already proceed to the signing of the contract. At the bottom of the paper, provide spaces for signatures, and make sure that everyone involved in the settlement agreement will be able to sign the deal.


What is a settlement agreement in divorce?

A divorce settlement agreement is a contract that presents terms and conditions between two married people after separating. A divorce settlement agreement goes by many names, such as a marital settlement agreement, separation agreement, collaborative agreement, and more depending on what state you are in.

What is a settlement agreement in real estate?

The settlement agreement for real estate is called the property settlement agreement. The purpose of this settlement agreement is to highlight conditions between two parties regarding how properties and assets are divided. This agreement takes effect mostly on divorcing spouses and should align on the divorce settlement agreement.

Is a settlement agreement a legally binding contract?

Yes. A settlement agreement is a legally binding contract that contains significant information that the parties involved have agreed upon. This agreement also contains terms once the agreed conditions are not met.

Regardless of the nature of the dispute, a settlement agreement is one of the many things a plaintiff and a defendant must consider once they decide to settle their dispute. The agreement is an important document that highlights their agreed terms. With an adequately prepared and well-written settlement agreement, both parties will be able to receive their expectations, respectively. So, if you conflict with someone and both of you decide to settle outside the court, having a written agreement should be a priority. If you are looking for one, browse on the sample templates provided above and choose the best one that suits your needs.