Settlement agreements are legally binding contracts used to resolve disputes between parties. Those who seek legal counsel for settlement agreements are typically either about to enter into an agreement, or they have an existing agreement that has been breached and they want recourse.

The first question an attorney will likely ask a client about their dispute is, “What are you settling?” In some cases, it may have to deal with money owed. However, settlement agreements do not always center around money.

If you are facing the development of a settlement agreement or the breach of one, it is critical to know what they are, what matters they concern, if this process applies to you, the advantages of these types of agreements and how attorneys can help.

What Are Settlement Agreements?

Settlement agreements are binding contracts that consist of terms that two or more parties agree upon in written form. To be enforceable, the agreements must include the parties’ signatures and possibly even a notary’s signature and stamp. When done properly and with the help of an attorney, this yields an official document that says the parties have come together to agree on the terms therein and that they will abide by them.

The process for arriving at the need for settlement agreements is fairly simple:

  • There is a dispute.
  • The parties raise the dispute, possibly in litigation.
  • The parties decide if they want to settle the dispute, or proceed to a trial.

When the involved parties must have a resolution, it requires either litigation or settlement. Settlements may include acquiescence by one of the parties, or a compromise by both or all.


Do I Need a Settlement Agreement?

Many people often need help discerning if their situation requires a settlement agreement.

In general, to justify a settlement agreement there needs to be either:

  1. An active dispute
  2. The potential for a dispute that the parties want to resolve before it becomes critical and does serious damage to the business or the persons involved


Breached Settlement Agreements

Because settlement agreements are binding contracts, parties may find themselves in a situation in which one or more individuals breaches the contract (i.e. does not take the action or refrain from an action they promised in the agreement). Often, the only recourse for this is litigation.

To prevent any room for misinterpretation of a settlement agreement, it requires that the terms be well-defined and detailed. It should include exactly what needs to be done to solve existing differences and comply with the terms of the settlement agreement. It should also include provisions for what rights a party has if the other party does not abide by their promises in the agreement.


The Advantages of Settlement Agreements

A lawsuit may have already been filed relating to the underlying dispute. At this point, the other party might decide they would rather settle outside of court and come up with a mutual agreement to get the court case dismissed.

There is an advantage of making a settlement agreement instead of taking the case to court. When a lawsuit is filed in court, it becomes public information. Decisions that juries and judges make are viewable by the general public.

However, in a settlement agreement, the parties can agree to terms that are not made public, which keeps the terms under wraps and avoids a long, drawn-out litigation process while still coming to a settlement. This is typically the most desirable option.


Do Settlement Agreements Require an Attorney?

People tend to look at the positive when it comes to settlement agreements and hope for the best outcome. Unfortunately, it seldom happens this way. It is difficult to imagine all possible scenarios and include language in the agreement which accounts for various outcomes. This means that, theoretically, attorneys are needed to compose and evaluate these documents to ensure the agreement is clear, valid, and enforceable.

When individuals try to develop their own settlement agreements without legal counsel, the outcome is not always the desired one.

It is not uncommon for individuals to decide on a settlement agreement, draft it up, and come together to sign. It may be that suddenly one party decides they do not want to sign. This means there is simply an unenforceable draft of the document, not an actual settlement agreement.

It could be a case where two parties drafted their own agreement, but the agreement did not make good sense due to contradictions or ambiguous language. The interpretation of the document could lead to many issues. Some cases take years to hash out what the parties’ intended. If the agreement regards the sale of real property, the sale could be delayed until the language in the agreement is resolved.

A reputable attorney with years of experience will be able to anticipate what kind of problems there are, discuss them with the parties, and incorporate them into the agreement to prevent contradictions and misinterpretations.

On the flip side, if a settlement agreement has already been made but breached, a lawyer can help clients manage the legal consequences or penalties of that breach. A breach allows the non-breaching party some rights and remedies from a wisely worded settlement.

Attorneys generally have a stronger and more complete knowledge of the statutes that protect their client’s rights. This means that a client might be able to bring a dispute to an attorney, and legal counsel would know that under something like the Texas property code, certain terms apply, and this means their rights are designated as X, Y, and Z.

It is possible to have an amicable settlement agreement. Yet, there are those individuals that no matter what they receive in a settlement, they will turn right around and ask for more tomorrow. The trick to crafting a solid settlement agreement is to make it so that you do not have to give said individual anything tomorrow.


To protect yourself and your rights in settlement agreements, enlist the help of a reputable and experienced Houston attorney.

Leave a Reply