A legal contract that gives the details of a compromise arrived at between two parties who have been in a dispute is called a settlement agreement.
This allows the parties in dispute to arrive at a solution guided by an employment law firm that avoids any need for litigation.
In a settlement agreement, both the parties release each other from any liabilities, past, present or future through a General and Mutual Release of All Claims that could have arisen from the events that led to the settlement.
In most settlement agreements, there is a consensus that neither party is agreeing to any liability, wrongdoing or fault. The agreements clearly state that the signature to the agreement does in no way indicate a concession, misrepresentation, evidence of a fault, omission or any action that has alleged a violation of the law.
It is not in any way a representation of any formal finding of wrongdoing that may have been arrived at by any administrative agency or court.
Such agreements are entered into to resolve issues that have come about because of any examination, investigations, and complaints and are meant to see that there are no risks, costs, and loss of time that is normally associated with litigation that can often be protracted.
In most settlement agreements some compensation is paid by one of the parties to the other, in exchange for the general and mutual release from further action, and it is important that the agreement spells out these amounts in detail.
The amount to be paid, the mode or form of payment, the time when it is to be paid and the party to whom it is to be paid, must be clearly indicated in the agreement.
Compensation can be paid before or after the agreement, and this clause needs to be a part of the agreement.
It is also important that there may be some action required by either party as part of the agreement.
These actions must be clearly spelled out, and the consequences of a breach should be also be clearly laid down.
Most agreements also need to certify that neither party has assigned the obligations, claims, demands, or causes of action to any other party. Settlement agreements are between the two parties who have reached the agreement and is not a binding on successors to either of the parties.
Both the signing parties have to promise that they have taken the action after obtaining all the necessary legal advice from lawyers of their choosing and that they have fully understood the terms of the agreement and voluntarily choose to accept them.
It is important that every settlement agreement include the governing jurisdiction and make reference to any documents that are supplemental to the agreement and which would give effect and force to the terms that have been agreed to in the signed document.
Parties to a settlement agreement are well advised to have a confidentiality provision though it can allow such disclosures to be made to solicitors and accountants who will be tasked with giving closure to the dispute.