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How Settlement Agreements Work

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How Settlement Agreements Work


By DeAnn Flores Chase August 24, 2018    Category: Business Law    

How Settlement Agreements Work

Business owners occasionally have to deal with disputes with customers, suppliers, and employees. These are sometimes resolved quickly and amicably, but in other cases, resolution takes longer, or litigation is started before an agreement can be reached. In many of these instances, a settlement agreement is a contract between two or more parties stating how they plan to resolve a dispute.

When Do You Use a Settlement Agreement?

Settlement agreements are useful when resolving a disputed claim, they provide you the protection of having a resolution of the issue, which may prevent the issue from having to be resettled again in the future. For example, if you’ve had trouble collecting payment from a customer and they are willing to agree that the owe you the outstanding amount and will pay it on a certain schedule, recording this in a written agreement will provide you with peace of mind and a way to enforce this against the customer if they change their mind in future.

Disputes regarding employees need to be handled especially carefully, generally with the assistance of your human resources professional and business attorney. These often revolved around an employee leaving your business, which often times occurs as a resolution to a difficult situation, and it’s integral to ensure the employee settles out their claims and prevents them from defaming your business. Using a settlement agreement here to outline both the severance package the employee has agreed to and your expectations regarding future relations.

If you’re emailing back and forth with someone in an attempt to resolve the conflict, it’s important to note in the correspondence that the email represents an attempt to reach an amicable resolution of a disputed claim. That ensures that the email itself doesn’t become the agreement, which winds up superseding any written settlement agreement you may reach.

Consult a Business Attorney

While some situations can be informally resolved and documented in email, it’s wise to consult an attorney before trying to resolve disagreements, especially those that could have a significant negative impact on your organization. Having an attorney involved can help ensure you don’t inadvertently make an admission that is against your best interest. Further, an experienced business attorney will have been involved in many different types of disputes in the past and has the collective experience of multiple solutions to allow them to suggest creative alternatives that may help quickly resolve an issue.

Having an attorney work with you to document your settlement agreement will ensure you have a strong contract that accurately represents what each party has agreed to in order to resolve the underlying claims.  A well written contract clearly lays out both sides and provides protections for each party in the event the other fails to fulfill their part of the agreement.

The team at Chase Law Group, P.C. can work with you to help you negotiate good resolutions to many different frustrating business situations and then document those in settlement agreements. We are experienced both in negotiation and coming up with creative resolutions that meet the needs of both parties. Give us a call at (310) 545-7700 to set up a consultation.