A settlement agreement is simply a contract between the parties to the dispute which sets out how the parties have agreed the dispute is to be resolved. Often the resolution of the dispute will be achieved by one party paying a sum of money to the other

When one company (or party) owes money to another, negotiating a settlement is usually an option. This can happen either before, during, or after a lawsuit to get a judgment. Settlement negotiations can occur anytime, although sometimes after settling, debtors do not actually follow up and make the payment they agreed to. This article discusses six other things for creditors to consider when reading settlement contracts, commercial contracts, and sometimes even proposed stipulated judgments.

This article is my opinion, and not legal advice. I am a judgment matchmaking expert, and am not a lawyer. If you ever need any legal advice or a strategy to use, please contact a lawyer.

A written settlement contract should clearly define the terms and remedies available, should either party breach the contract. Here are six other things a creditor might consider in settlement negotiation contracts, to discuss with their lawyer:

1) Make sure there is a firm deadline for the debtor to make their payment; and that the settlement contract becomes null and void in the event of either non-payment, or if the debtor files for bankruptcy. If your debtor files for bankruptcy protection, you might then wish that you had never settled with them. I am not a lawyer, so please discuss any bankruptcy questions or issues with a bankruptcy attorney.

2) Consider having the debtor(s) notarize their signature(s) on the settlement contract. There is rarely any legal requirement for a settlement contract to be signed in the presence of a notary public. However, doing this means that if a new lawsuit is required later, notarized documents are usually self-authenticating; which usually makes it easier to get the documents accepted as evidence. Also, using a notary reduces the chance of any forgeries.

3) Make sure that all debtors, and anyone else that should sign; does sign. Depending on the circumstances, some examples might be the debtor’s spouse, their accountant, company officers, their attorney, etc.

4) When there are settlement negotiations during an ongoing lawsuit, or with any negotiated settlement contract situation, consider arranging to “transform” the contract or lawsuit into a stipulated judgment; signed by a court judge. Stipulated lawsuits to get stipulated judgments, not having any adverse parties; can be extremely cheap and relatively quick, and judgments are stronger and last longer than signatures on contracts. Turning a settlement contract into a stipulated court order and judgment, can simplify multiple transaction situations; and the court retains jurisdiction over the matter, should there be a default.

5) While it is rare, sometimes settlement contracts are kept confidential. Note that judgments are usually public records, however in certain situations involving stipulated judgments; some of the details might be kept out of the court files. If there is no judgment involved, then strong confidentiality clauses can be included.

6) Many settlement contracts include clauses to release specific current or future claims. Double check that the proper claim releases are within the contract.



The Contract Dispute of ___________________.

Under Contract No. ______________

ODRA Docket No. ___-ODRA-___

This SETTLEMENT AGREEMENT is entered into this _______, 201_ by and between ____________. (hereinafter the “Contractor”) and the Transportation Security Administration (hereinafter the “FAA” or the “Agency”), for themselves, their officers, directors, executives, managers, employees, agents, attorneys, divisions, related and subsidiary entities, affiliates, successors and assigns (all of whom are collectively referred to as the “parties”).

WHEREAS, the Agency awarded contract _________ (the “Contract”) to the Contractor; and


WHEREAS, certain controversies have arisen with respect to the performance and payment under the Contract (hereinafter the “Controversies”); and


WHEREAS, the Contractor filed a Contract Dispute (“Contract Dispute”) with the FAA Office of Dispute Resolution for Acquisition (“ODRA”) on ______, 20__, regarding such Controversies, which has been docketed as ODRA Docket No. ___-ODRA-____; and


WHEREAS, under an alternative dispute resolution agreement dated _____, 20__ (the “ADR Agreement”), the parties conducted a mediation on ________, for the purpose of compromise discussions pertaining to the Contract Dispute; and,


WHEREAS, the parties reached an accord through ADR regarding the Controversies and the Contract Dispute, and now wish to commit the terms of their accord into this Settlement Agreement; and


WHEREAS, each party has been represented by counsel, has been apprised of its rights regarding the settlement, and enters into the settlement freely and voluntarily.


NOW THEREFORE, in consideration of the premises and mutual promises contained herein, the parties agree as follows:


  1. NO ADMISSION OF LIABILITY. Neither this Settlement Agreement nor anything contained within it shall be admissible in any proceeding as evidence of liability or wrongdoing on the part of either party. However, this Settlement Agreement may be introduced in any proceeding instituted to enforce its terms.


  1. PROMISE TO PAY. In full settlement of the Controversies, the FAA shall pay to the Contractor the amount of _________________ dollars (the “Settlement Amount”). Such Settlement Amount includes all monetary remedies of any kind relating to the Controversies, including but not limited to, equitable adjustments, interest, unpaid portions of amounts in prior invoices under the Contract, and other remedies requested in the Contract Dispute.


  1. INVOICING and PAYMENT. In order to process payment of the Settlement Amount in a routine manner, the Contracting Officer will incorporate promptly the terms of this Settlement Agreement into a modification to the Contract.  The contractor will then submit a proper invoice for payment of the Settlement Amount.  Payment will be made pursuant to applicable regulations and the interest provisions of the Prompt Payment Act, 31 U.S.C. §§ 3901-3907.


  1. SUSPENSION AND DISMISSAL. The Parties agree that within one business day they will jointly file with the ODRA a request to suspend any pending adjudication schedule. Upon receipt of the payment referenced in Paragraph 3 hereof, Contractor shall immediately file a motion with the ODRA seeking dismissal of ODRA Docket No. __-ODRA-___ with prejudice, by reason of the parties’ settlement.


  1. MUTUAL RELEASE OF ALL CLAIMS. In consideration for their faithful performance of the terms of this Settlement Agreement, the parties, for themselves, their successors, assigns, and (in the case of the Contractor) subcontractors (at any tier), do hereby relinquish, waive, release, acquit and forever discharge each other of and from any and all claims, disputes, actions, charges, contractual obligations, complaints, causes of action, rights, demands, debts, damages, or accountings of whatever nature, at law or in equity, known or unknown, asserted or not asserted, which they have now or may have in the future against one another, based on any actions or events which occurred prior to the date of this Settlement Agreement, including without limitation the aforesaid Controversies and those arising out of or related to the aforesaid [Solicitation]/[Contract], any claims for delay, disruption and impact, any claims (including statutorily based claims) for attorneys’ fees and costs incurred in connection with them, and any claims for interest, except as provided for in Paragraph 2 of this Settlement Agreement.


  1. BINDING EFFECT. This Settlement Agreement shall be binding upon and inure to the benefit of the parties’ respective heirs, successors, assigns and personal representatives.


  1. NON-ASSIGNMENT. A party’s rights under this Settlement Agreement may not be assigned without the express written consent of the other party, which consent may be given only in accordance with applicable law and regulation.


  1. ADDITIONAL DOCUMENTS. The parties agree to execute whatever modification(s) of the Contract, invoices, and any and all other additional documents as may be reasonably necessary to carry out the terms, conditions and obligations of this Settlement Agreement.


  1. INTEGRATION. This Settlement Agreement is entered into by each of the parties without reliance upon any statement, representation, promise, inducement, or agreement not expressly contained herein. This Settlement Agreement constitutes the entire agreement between the parties concerning the aforesaid settlement and release of claims.


  1. SEVERABILITY. If any portions of this Settlement Agreement are held invalid and unenforceable, all remaining portions shall nevertheless remain valid and enforceable, to the extent they can be given effect without the invalid portions.


  1. NEGOTIATED TRANSACTION. Each of the parties has participated in the drafting and negotiation of this Settlement Agreement. Accordingly, for all purposes, this Settlement Agreement shall be deemed to have been drafted jointly by the parties.


  1. COUNTERPARTS. This Settlement Agreement may be executed in any number of copies, each of which shall be deemed to be a counterpart original.


  1. REPRESENTATION OF AUTHORITY. Each person signing this Settlement Agreement hereby represents and warrants that he or she has the authority to bind the entity on behalf of which he or she has signed.


IN WITNESS WHEREOF, the parties hereto have executed this Settlement Agreement on the date written above.





FEDERAL AVIATION                                             [CONTRACTOR]




By: _________________________                           By: _________________________

[Name], Contracting Officer                                      [Name and Title]