Key points you should know when drafting a settlement agreement.

In most cases, the dispute clause in the commercial contract sets out the requirement for the contracting parties to resolve the dispute within a certain period before having the conflict settled by a court or arbitration. It is prudent to record the terms of the agreement in writing to obtain both certainty and finality. The concept of settling a dispute is straightforward, but the task of documenting a settlement can be complex. This article sets out a checklist to bear in mind when drafting a settlement agreement.

When making the preparation for a settlement from the beginning of the case, you should generally do all of the following:

1. Evaluate the arguments, claims and demands from the client and its counterpart.
   To know the cause of the conflict and understand the client and its counterpart’s point of view, you have to evaluate the disputing parties’ arguments, claims, and demands.
   
   
2. Retain relevant documents.
   To avoid the loss of documents that are potentially relevant to settlement agreement negotiations, send a retention of documents notice to all appropriate parties as soon as possible.
   
   
3. Decide whether (and when) to make an offer.
   Assess the potential for prevailing in the underlying court case. Then, consider any potential liability as well as your client’s appetite for litigation and publicity. Always weigh the costs versus the benefits of litigating rather than settling.
   
   
4. Evaluate the reasons for settling.
   You should discuss the reasons for settling and how those reasons may play into the negotiations with your client.


5. Assess motivating factors to settle.
   When deciding how to negotiate a settlement agreement, consider the motivating factors of both parties, such as:
   • The parties’ financial situations
   • Viability of the asserted claims
   • The likelihood of success during litigation
   
   
6. Confirm the client’s ability to settle.
   Ensure the client has the ability to make any required payments in a timely fashion and to provide/perform any other consideration provided for in the agreement.
   
   
7. List all covered parties.
   At the outset of settlement negotiations, list all individuals and entities—both for the plaintiff and the defendant—that the agreement will cover.
   
   
8. List all legal issues to be settled.
   List all claims your adversary may legally release via settlement. Verify that the agreement covers these claims.

How Schinder Can Help
Our lawyers have extensive experience representing dozens of companies in the negotiation process of a commercial dispute which often results in the client’s preferable result. Should you need any services related to commercial contract and commercial dispute matters, please feel free to write to us at info@schinderlawfirm.com .