Monday, September 27, 2010

Focus on Litigation: Settlement Agreements

When a dispute seems to have been resolved by a verbal agreement, many could be forgiven for thinking that a lawyer’s role is no longer necessary. After all, the only thing still required at that point is a written record, signed by both parties, as regards the terms on which the dispute has been settled. It sounds easy.

However, properly putting a verbal agreement into writing is not always easy. A fully protective settlement agreement requires a great deal of legal precision. Some immediate questions arise, for example:

  • Are all of the relevant entities correctly named as parties to the settlement agreement?
  • Are the individuals who plan to sign the agreement actually authorised signatories with the power to bind the entity which they represent?
  • Does the agreement adequately resolve all issues in dispute?
  • What rights will be triggered if the agreement is breached?
  • In which country, pursuant to which law, and in which forum will any litigation/arbitration take place as regards any breaches of, or disputes arising out of, the agreement?
Many settlement agreements do not spell out with requisite precision who will do what, and when. Equally, they may contain terms that are not defined, or which are defined too loosely, thereby leaving these terms – such as “handover date”, “payment issues” or “additional resources” – open to interpretation.

An imprecise settlement agreement may turn out not to be a true settlement at all. The only way a settlement agreement genuinely can signal the conclusion of a dispute is when it is drafted with the exactitude required. This can prevent the perceived ending of one dispute from becoming the start of another dispute.