What is a Settlement Release Agreement?
A settlement release agreement is a legally binding contract between two or more parties in a lawsuit that finalize the dispute. It will typically contain the terms of the settlement, such as the amount of money paid and deadlines for performance of the terms. It will likely also require the release of all other claims by the parties, meaning that they cannot sue over that particular issue again.
Settlement releases are useful because they save the parties both time and money. They avoid the costs of conferences and hearings, trials, and post-judgment proceedings. There is no guarantee that the successful party in a lawsuit would actually collect on a judgment against the other party. For example, obtaining a $1 million judgment against the opposing party would be useless if the opposing party filed for bankruptcy or was under-income and could not make such a large payment. Settlement releases help ensure that the settlement is enforced.
Because settlement releases operate as contracts, the parties can agree to any terms they like. However, certain types of claims must be specifically waived in order to be barred. However , generally claims that arose out of the dispute being settled will be included in the settlement release. It is very important to thoroughly understand the scope of a settlement release.
The settlement release will usually indicate that the claims being released occurred up to the date of the settlement release. However, it is wise to release specific claims that the parties agree are settled. If the parties do not specifically named and include those claims, it is possible that the claims did not arise out of the matter being released and are therefore not released.
The parties will usually agree to keep the terms of the settlement release confidential. This allows the parties to avoid future litigation through the court system. Although the judge in the court case would always be privy to the settlement agreement, other parties in the past and future could be prevented from finding out about the settlement agreement.
Usually the settlement release will be limited to the immediate dispute at hand. Future disputes are not typically encompassed by a settlement release unless the release explicitly states that they are.
Important Features of the Template
In defining the essential components of a settlement release agreement template, the first and probably most important aspect is being specific about who the parties are. Jurisdictions obviously designate the physical and/or legal address of the parties involved in the settlement. Another useful element in identifying the parties to a settlement is providing any available identification numbers, be they Social Security or other identification numbers. These details are important because often the person or entity receiving the actual settlement benefits are of a different legal stature than the litigant in the case. For example, when the person receiving settlement compensation is an insured entity, the incorporation details or other ownership details should be provided to clearly and legally transfer the rights of the funds from the insurer to the other party. There are also times when the case settled because of the actions of a minor child. In these cases, the parties to the suit could include parents or guardians who may be receiving a settlement on behalf of their child. If this is the situation in cases where the child is the litigant, it is important that the identity of those involved should be clear.
After the parties have been identified, the terms of the settlement itself needs to be very clear. The settlement itself may encompass several aspects, such as an annuity, a lump sum, and ongoing structured payments. It is important to be clear about these components of the settlement, especially being specific about how the settlement is structured, the amounts to be dispersed in each installment, and the payment schedule.
The third component to an effective settlement release agreement is the release itself. The release should be very broad yet specific, encompassing as much of the issues involved in the action and any ancillary actions that could have stemmed from the incident. For example, a general release in a car accident settlement should include waivers to any claims that might arise from the actions of the other party after the suit has been settled. An obvious example of this might be a personal injury action. If the involved parties settle a personal injury lawsuit, part of the legal language in the release should include waivers to any further personal injury or bodily injury claims resulting from the same incident.
Advantages of Utilizing a Template
The advantages of utilizing a settlement release agreement template are plentiful. For one, it can offer significant time savings. Since a template has already outlined the legal requirements of having a release agreement, a settlement release agreement template can save you from the time-consuming process of researching these requirements, formulating the text, and double- and triple-checking to ensure accuracy. Already having an accurate outline can save hours.
Utilizing a settlement release agreement template can save money on attorney’s fees. Hiring an attorney to draft a release agreement for you can be expensive. But with a template, you won’t need to hire an attorney to draft it for you. This will save you time and money so you can spend more time focusing on your family or making new memories.
Most settlement release Agreement templates will include more than just the legal requirements for such an agreement, so utilizing one will help you capture all important details. Having all the details straight is especially important if a settlement release is being drafted after litigation, as both parties will want to ensure all aspects of the settlement have been taken into account.
Avoiding Common Pitfalls
Failure to Specifica No-Future Claims. A settlement release agreement should always address both past and future claims arising from the controversy. There is no bar to an employer settling a claim and also prohibiting any future, related claims. So long as there is a compelling business justification for including such language, it can serve both to protect the employer from future litigation, and to help the employee recognize that he or she has given up all possible claims.
Poor drafting of the Release Agreement. Drafters of release agreements should be careful to avoid common legal pitfalls. Beyond specifying that no future claims are being released, the drafter should be clear that no claims are being admitted or denied in the Settlement Release Agreement. Similarly, the drafter should recite both employer and employee obligations clearly and with enough specificity that there is no room for misunderstanding.
Failure to Address Confidentiality. Some courts have invalidated releases with confidentiality provisions that contained no temporal or geographical limitations. Even if not strictly enforceable, such provisions are problematic in that they will give the employee the opportunity to use such provisions to his or her advantage after the fact.
Failure to Address Demonstraable Involvement in Employment. Drafters should be careful to ensure that their release agreements address at least some level of demonstrable involvement in the employment. If the employee is not required to agree to cooperate in the transition of his/her employment, he or she may simply flee the office or otherwise leave arrangements for transition unmade. This makes the employer’s transition much more difficult.
Steps to Personalize Your Agreement Template
Effective modification of a generic settlement release agreement template to meet the specific needs of a legal case or the requirements of the parties requires an understanding of the following key sections, terms and concepts:
- (1) The Parties. The names and contact information of all parties to a settlement agreement should be clearly identified within the opening section or title of the document. Each party is usually referred to as a "releasor" and "releasee" for legal purposes within the release agreement itself. The full and legal names of the person or business should be included, along with their addresses and phone numbers. Fictitious business names, such as "doing business as" or "aka" names must be included for sufficient clarity.
- (2) Release Terms. This section defines the obligations that will remain valid after the finalization of the settlement. Generally a simple release clause should state that the terms of the agreement are binding and should define what actions may or may not be taken as a result of settlement . For example, an insurance company may require that the claimant not pursue further compensation for the same damages after settlement takes place.
- (3) Effective Time and Place of Agreement. All releases have a mutually agreeable place, date and time of effectiveness that should be included in relevant sections. This may include the signature of many parties and witnesses, as well as the date it has been executed and effective as a contract.
- (4) Dispute Resolution Process. All releases involve means by which to deal with future disputes. This may be arbitration, litigation or another mechanism for settling issues without the need for further agreement. The dispute resolution process should be defined in a suitable section for it to be sufficient.
- (5) Signatures of Witnesses. Some releases require the signatures of impartial witnesses. These people should include those who are not connected to any parties to the agreement. It is important to have witnesses in the event of future court testimonies.
Legal Aspects and Compliance
When drafting a settlement release agreement, there are several legal considerations one must be aware of in order to ensure the agreement is enforceable and provides the intended legal protections. One of the key aspects to consider is the principle of consideration, which refers to the notion that both parties of the agreement have entered into it voluntarily with either the exchange of a thing of value – a contract – or the promise of something of value – a unilateral contract. In cases where the settlement release agreement refers to a litigation settlement, compliance with the applicable jurisdiction’s rules for settlement of the underlying claim must be adhered to. This means that any documents that need to be filed in open court or approved by a judicial officer have to be.
Jurisdictions may also place limitations on the types of claims that can be released via a settlement release agreement. Typically, jurisdictions do allow all claims that have already arisen, but the release cannot address unknown future claims or those that might be discovered at a later date. If the party intends to release claims prior to the execution of the release agreement, the agreement must state that it releases both known and unknown claims. Common law jurisdictions will often refer to the legal doctrine of "res judicata," and thus states that once a final judgment is entered, a release will release all claims that could have been brought in the same action. As such, a release in that jurisdiction should contain the language "any and all claims" to be completely effective.
Another important legal consideration to keep in mind when relying upon a settlement release agreement is that it typically does not cover any claims that are individual in nature. This is not meant to be a restriction of the scope of the settlement release agreement, but rather a protection for those claims that may individual parties may wish to not be extinguished. For instance, when settling employment law related claims, it is not unusual for the settlement to not be meant to extend to claims for unlawful discrimination based on race, gender, sexual orientation, paid and unpaid wages, etc.
In addition, there may be regulatory requirements a party should consider before drafting a settlement release agreement. For instance, in California, settlement release agreements must comply with the California Labor Code. Namely, California Labor Code ยง 2922 states that employment may be terminated "at the will of either party on notice to the other." As such, any settlement release agreements drafted in California should refer to that language and contemplate the employment being terminated "at the will of either party on notice to the other."
Accordingly, when drafting a settlement release agreement, the drafter should consider these legal considerations and ensure that the agreement is compliant with all applicable laws and regulations.
How to Create Your Template: A Step-by-Step
While there are many different ways to draft settlement release agreements, this guide provides a simple step-by-step process that you can follow to draft the bulk of your settlement agreement from a template.
- Identify the Parties. Settlements are generally between two or more parties. All parties should be identified by their legal name (or corporate entity), and you should accurately quote any applicable aliases or nicknames.
- Recitals and Preamble. Normally, settlement agreements have a small block of text that expresses the intent of the parties. You can use any language that works for your agreement. In general, however, it is best to keep it short and simple. Parties may also want to identify the cause of the dispute and the legal basis for the settlement. Finally, the parties may also make a brief statement that the settlement is on a non-litigation basis for the sake of expediency.
- Settlement Amount. Parties need to agree on what is being released. The parties must state the exact amount of the settled claim being released, so the parties must determine whether they will agree to settle all of the claims or only some of the claims. The parties should also agree on payment methods for the settlement (e.g., payment terms, installment payments, types of payments).
- Release Language. Use clear and precise language when identifying particular releases in the settlement agreement. The release language in the settlement agreement may be one of its most important provisions. It limits claims or disputes in the future.
- Exclusions. Parties should decide whether there are any specific claims or disputes that will be excluded from the general releases in the contract.
- Legal Provisions. A settlement agreement should include several provisions that provide a general framework for legal recourse if there are future disputes. For example:
- Execution and Survivability. Parties should agree on how the agreement will be executed, and on when the agreement will become binding.
Additional provisions that may be used in settlement release agreement templates include: agreement to cooperate, confidentiality agreements, confidentiality stipulations, arbitration clauses, integration clauses, assignment clauses, governing law clauses, confidentiality agreements, waiver clauses, and severability clauses.
When to Seek Legal Guidance
When you enter into any sort of agreement or contract, it’s always a good idea to have a legal professional like a lawyer or attorney look over the documents to ensure that your rights are explicitly laid out. This is no different when it comes to a settlement release agreement, and there are several examples of cases in which this could prove immensely helpful.
You should always consider consulting a lawyer or legal expert when:
However, the primary reasons for consulting a professional prior to signing a settlement release agreement are as follows:
It might be a good idea for you to consult with a lawyer for any number of these reasons. In general, if you’re dealing with a significant injury or a complex or messy case, you should get outside perspectives on the case so you’re able to make informed decisions .
This does not mean you need to go over every single detail, especially in the case of smaller injuries or claims, but for a devastating personal injury requiring high amounts of treatment, or a case where there are a lot of gray areas, retainment of a lawyer may be a solid recommendation from a settlement release agreement template.
Again, not every instance of a settlement release agreement warrants the services of a lawyer or legal expert. It’s largely at the discretion of the involved parties in the matter, but it’s still a good idea to keep a checklist of these issues handy so that you can better understand the issues you’re facing, and whether a legal professional could be of assistance to you in drafting and/or reviewing settlement documentation and agreements.