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Considerations In Settlement Agreements


So it looks like you are about to settle that business lawsuit that has cost you time and money litigating in court. Congratulations; settling can often be a smarter, wiser (and cheaper) choice than going to trial. But before you settle, you need to sign a settlement agreement. What should you look out for in settlement agreements?

Certainly every settlement agreement will be different based on the claims and the type of cases. With that in mind, here are some common pitfalls and things to look for in settlement agreements.

Payments in Installments (or promises of later performance) – Your settlement agreement may allow a side to make a number of payments. Or, your agreement may require one side or the other to perform something, like a service, or delivery of a product, or construction, or some other non-monetary condition that will be done later on.

What’s the penalty for not performing under the settlement agreement? The last thing you want is to be back in court, arguing again about the merits of the case because your settlement agreement wasn’t compiled with.

You may want to consider an automatic default condition, where failure to make full payment, or perform a later service, will allow the non-breaching party to simply apply for a default with the court. Alternatively, you can explore keeping property in escrow to secure amounts to be paid later under the agreement.

Confidentiality – Confidentiality provisions have a few concerns. The first is whether you want to require (or agree to) keeping the terms of the settlement confidential, but what is confidential? The terms of the settlement, the facts surrounding the claims or defenses, or both?

Additionally, your settlement agreement may need to include a damage provision, in the event confidentiality is breached. Otherwise, you may need to prove your damages, should you opt to sue to enforce your confidentiality agreement.

Notices of Default-Will there be a provision in your agreement where a party is notified of a breach of the settlement agreement before a lawsuit can be filed? If so, is it simply notice, or will the notice include a fair chance for the breaching party to cure or fix the breach before a court gets involved?

Remember that if a notice provision is included, the party giving the notice will need to strictly comply with those terms, otherwise the court may not allow you to move forward with a claim for breach of the settlement agreement.

Time – If the agreement requires payment of money, or performance of some act, does the agreement say how long the party will have to pay money or do the act? If not, you may be left having to wait some time, before suing to enforce the agreement.

Attorneys Fees – Does your agreement specify that the prevailing party will get attorneys fees, in the event you need to sue for any breach of your settlement agreement? This can help you avoid or mitigate legal costs, and make it easier for you to go to court to enforce your settlement agreement.

Call the West Palm Beach business litigation attorneys at Pike & Lustig today for help with every part of your commercial litigation case.



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