Settlement Agreement: How They Work, Key Terms

Trustpilot

ContractsCounsel has assisted 185 clients with settlement agreements and maintains a network of 120 business lawyers available daily. These lawyers collectively have 16 reviews to help you choose the best lawyer for your needs. Customers rate lawyers for settlement agreement matters 5.0.

What is a Settlement Agreement?

A settlement agreement is a legally binding contract that outlines the resolution to a dispute. After negotiations but prior to a final judgement, parties can come to a mutual agreement to an outcome for the case and enter a legally binding settlement agreement.

Settlement agreements are common in divorce and marital disputes, property disputes, personal injury cases, and employment disputes. These agreements not only keep disputes out of court, but they also save parties from having to pay expensive legal fees for continued litigation and trial.

There are certain legal requirements to which a settlement agreement must adhere to be valid and legally binding. Once a settlement agreement is complete, it must be presented to and approved by a judge.

How Do Settlement Agreements Work?

When two parties decide that they would like to pursue a settlement agreement rather than proceed to trial, negotiations will begin. It is common to use a non-biased mediator to assist the parties in coming to mutually agreeable terms.

During negotiations, the parties will lay out their terms and goals for the agreement and go back and forth until every issue in the case is settled. After the parties have agreed on all terms and it is ensured that all legal requirements of the settlement agreement are fulfilled, a judge must approve and sign off on the agreement.

If you want to be sure you’re prepared for a successful settlement agreement, read this article.

Marital Settlement Agreements

A marital settlement agreement (MSA) or divorce settlement agreement is a very common type of agreement. A couple going through a divorce may find a settlement agreement beneficial to save money on legal fees and to keep their dispute as civil as possible.

Depending on which state you reside in, marital settlement agreements are referred to by many different names. Examples of some other names for marital settlement agreements include:

Some issues that may be covered in a marital settlement agreement include:

If two divorcing parties can agree to the terms of their divorce, an attorney or mediator can draft the marital settlement agreement. In some states, a judge will review the terms to make sure they are fair. This agreement will then be incorporated into the final divorce decree. This makes the agreement a binding court order and if either party violates it, they can be held in contempt of court.

Often in a divorce case, one party will draft a settlement agreement to propose to the other party. It is important to remember that it is just a proposal, and you are not obligated to agree to all the terms and sign it. This is just the beginning of negotiations. You should consider consulting a family law lawyer to look over the proposed terms to ensure you are protected.

Even if you agree to all the proposed terms, it is still imperative that you have your own lawyer review the proposal. You want to make sure that someone who is representing your best interests has gone over the agreement. This is the only way to protect your interests and rights.

Although once signed a divorce settlement agreement becomes legally binding, that does not mean that it cannot be modified or revised. If the revision involves a financial matter, generally both parties will have to agree to the revision.

However, if there is a significant change in circumstances, child support, custody, or visitation, can be modified by a judge to protect the best interests of the child.