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What Is A Settlement?

A settlement is an agreement reached between two disputing parties before or during court proceedings that will end the dispute. Normally this occurs when the defendant agrees to some or all the plaintiff’s claims and decides not to take the dispute into court. The settlement acts as a binding contract that prevents the plaintiff from renewing their lawsuit. As a result, most settlements occur before a trial or early in its development. For cases where the litigation involves a lengthy trial, multiple parties, large sums of money, or complex legal issues a settlement requires the approval of a court. These cases are known as complex litigation and a typical example of one of them would be a class-action lawsuit involving multiple defendants.
In most cases, settlements involve the defendant paying the plaintiff. There are different types of settlement payments and each carries its own nuances.

Types of Settlement Payments

In a settlement, the party receiving payment can either agree to a structured settlement where they will receive periodic payments of a certain amount of money or one lump sum payment. Usually, the structured settlement provides a tax advantage to the recipient and savings for the person paying.

Why Do People Settle?

The majority of individuals who settle do so to avoid the large costs associated with bringing a lawsuit to court. By agreeing on a settlement both the defendant and the plaintiff avoid the costs that come with a trial. Defendants prefer the cost of a settlement than the costs a drawn-out trial. Even when compared to mediation and arbitration, both options to avoid trial, a settlement can many times be the cheaper option. Many companies also settle to avoid negative press that could result from a trial. If a company were to face a discrimination claim they would often try to settle out of court in order to avoid the unwanted attention that could come from the litigation.

Can Settlement Agreements be canceled?

There are certain cases in which a settlement agreement can be canceled. One example is if a settlement agreement was reached on account of fraud or misrepresentation by one of the parties involved. Some parties may misrepresent their financial outlook or not disclose key information in order to receive a better result in the settlement. If this happens then the settlement is eligible for cancellation.

Settlements may help you avoid the courtroom, but it is still strongly recommended that you seek the help of a lawyer when dealing with a settlement agreement.

PereGonza The Attorneys can offer a free consultation and give you insight on what the best course of action for what your specific case may be. Fill out our personal intake form for more information.


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