Settlement is often regarded as the final chapter in what can be lengthy and expensive litigation processes. For many businesses and individuals, it represents relief from the uncertainty, expense, and strain of continued legal proceedings. In that sense, settlement is commonly viewed as the “way out” of a dispute.
The conclusion of a settlement agreement does not necessarily mean that all risks have been disposed of. In most instances, the wording of the settlement agreement determines whether the dispute has truly been brought to an end, or whether an outstanding unidentified, dispute remains.
A settlement agreement that is unclear, incomplete or too narrowly drafted leaves room for further disagreement or rehashing of related disputes, particularly where the parties later differ on what exactly was settled or what obligations remain. It is therefore crucial that the settlement agreement be reduced to writing and provide for the scope of settlement, the date by which any performance is due, and appropriately account for any recourse a party may have against another for failure to perform. A form of recourse that is commonly provided for in settlement agreements, particularly those concerning the payment of money, is the inclusion of an acceleration clause, requiring the immediate payment of all outstanding amounts upon a party’s breach of the agreement.
A settlement offer often requires a party to forfeit part of its claim, defence, or bargaining position in order to bring the dispute to an end. For that reason, timing matters. Lengthy litigation, accrued legal fees, and feelings of fatigue and constant pressure can make any offer appear attractive, even where the proposed terms do not properly resolve the dispute. A settlement should never be accepted simply, and solely, because it presents an end to litigation.
In certain circumstances, a party will propose settlement for reasons that are not limited to resolving the dispute. A settlement proposal could, for example, be used to delay enforcement, obtain more time to perform, or temporarily avoid the consequences of ongoing litigation. In practice, such “tactical settlement” is deterred by inserting consequential breach clauses.
Settlement is intended to provide a “way out” of litigation, but the protection it offers depends largely on the care taken in recording its terms. A settlement agreement should not simply mark the end of a dispute; it should provide clarity on what has been resolved, what obligations remain, and what steps may follow if those obligations are not met. When properly considered and carefully drafted, a settlement agreement may serve as more than a compromise. It may become a practical mechanism for preserving a party’s rights, managing risk and ensuring that the resolution reached between the parties is capable of being carried into effect.
Should you have any queries or concerns regarding the terms, scope, or enforceability of your settlement agreement, please do not hesitate to contact C&A Friedlander Attorneys Inc.
MATTHEW APEL
Candidate Attorney
matthew@caf.co.za