• 2023.06.06
  • Dispute Resolution

Settlement Agreement

Importance of the Draft Terms of the Settlement Agreement

When there is a dispute between the parties and the dispute is to be terminated on the condition that a certain amount of money is to be paid, a Settlement Agreement will be drafted that describes the details of the settlement. In particular, since this is a settlement agreement between parties who are already in dispute, it is important to have the terms of settlement and the fact that the dispute has been resolved in writing in order to prevent the dispute from being revisited at a later date. In addition, since the circumstances under which the settlement agreement is concluded are based on the circumstances of the parties being in an adversarial relationship, it is possible that differences in interpretation of the language of the settlement agreement may cause disputes to arise again. Therefore, in drafting the terms of a settlement agreement, it is necessary to examine the terms of the agreement particularly carefully.

Title of the Settlement Agreement

Settlement agreements may be titled in various ways, such as Settlement Agreement, Settlement Agreement and Release, or Release and Covenant Not to Sue.

Identifying the Scope of the Dispute Covered by the Settlement Agreement

First, in a settlement agreement for the resolution of a dispute, it is necessary to identify the dispute that is the subject of the settlement. The identification of the dispute is made by stating the nature of the dispute and the parties to it. This part of the agreement is usually described in the preamble (Recitals), but the level of detail should be determined on a case-by-case basis. For example, the following statement may be considered

WHEREAS, there has arisen a dispute between A and B regarding certain products; and
WHEREAS, A and B desire to resolve their dispute; and
NOW THEREFORE, in consideration of the premises and mutual promises contained herein, the parties agree as follows:

Consideration for the Settlement, Terms of Payment, and Other Terms of Settlement

If the parties agree to the payment of a certain amount of money or other terms and conditions as a condition of settlement of the dispute, such agreement shall be set forth in the Settlement Agreement. The payment of the settlement payment can be made in installments or other flexible payment methods depending on the financial resources of the other party, but it is desirable for the party receiving the settlement payment to be able to collect the settlement payment more reliably, and in some cases, payment in installments over a long period of time may not be appropriate as a payment method.

In full settlement of the Controversies, A shall pay to B a total of Six Thousand US Dollars (US $6,000).

Installment payments

If the Settlement Payment is to be paid in installments, the due date and the amount of each installment must be clearly stated.

A shall pay to B the Settlement Amount in the above article in three time installment payments as follows:
January 31, 2019 $2,000
February 28, 2019 $2,000
March 31, 2019 $2,000

Confirmation that the settlement does not constitute an admission of liability

In drafting a settlement agreement, it is particularly important to note that the party paying the settlement should not admit its own liability for the matters giving rise to the settlement payment. For example, in a dispute over copyright infringement, you should be cautious about admitting that you are responsible for infringing the copyright. If the fact that you entered into the Settlement Agreement or made the Settlement Payment itself is evidence of an admission of liability, then there is a risk that further lawsuits may be filed between the parties to the Settlement Agreement or with related parties on the basis of the admission of liability in the Settlement Agreement. The other party may seek to add an apology, but such a provision should also be carefully considered.

Confirmation of Release from All Claims upon Settlement (Release)

Since the purpose of a settlement agreement is to resolve disputes as described above, it is necessary to provide that the settlement agreement releases the parties from any and all liability with respect to the disputes covered by the settlement. Here, it is important to specify not only the parties to the settlement agreement, but also those who may be subject to pursuit of liability in connection with the subject dispute, and to provide for a broad release of liability. For example, this could be the company, its representatives, employees, agents, parent company, subsidiaries, business partners, etc.

Clauses other than payment of the settlement

Clauses other than settlement payment may be added to the Settlement Agreement. For example, a Settlement Agreement may be executed by agreeing to pay the delayed amount and damages in installments due to the delay in the buyer’s payment of the price. At that time, the seller may wish to have a clause added that the seller will not be liable for defect warranty or product liability in the future, for which the liability was unclear in the purchase agreement. It is possible to clarify such contractual provisions in the settlement agreement. We are often asked by our clients to review the terms of the agreement and clarify unclear portions when concluding a settlement agreement.

Other general terms

Settlement agreements often contain so-called “general provisions” such as confidentiality obligations, methods of dispute resolution such as court of competent jurisdiction, and choice of governing law.

Settlements Not in the Form of a Settlement Agreement

Even if a dispute exists and the parties settle the dispute by means of a settlement, it is not always in the form of a settlement agreement. Some companies may wish to keep their involvement in a dispute confidential. In such cases, the form of the agreement, while in reality a settlement, may only be a promise to grant some benefit as a condition of the settlement. For example, in a dispute over infringement of intellectual property rights, the party who is accused of infringing the intellectual property rights may seek to end the dispute by concluding a license agreement with the other party for the intellectual property rights in question.

Sample1 of Settlement Agreement

Settlement Agreement
This Settlement Agreement is entered into on May 1, 2020, between AAA and BBB with regard to the dispute between the parties.

  1. 1 In consideration of the payments set forth in Section 2, AAA hereby completely releases and forever discharges BBB from any and all past, present or future claims, demands, obligations, actions, causes of action, damages, costs, expenses and compensation of any nature whatsoever, whether based on a tort, contract or other theory of recovery.
  2. 2 In consideration for this settlement and release, BBB agree to pay AAA the amount of $100,000 as full payment, subject to the terms and conditions of this Agreement.
  3. 3 This release shall be a fully binding and complete settlement among the parties, and their heirs, assigns and successors.
  4. 4 This agreement constitutes the entire agreement between the parties and supersedes any prior written or oral agreement between the parties concerning the subject matter. No modifications or amendment shall be effective unless confirmed in writing and agreed upon by both parties.
  5. 5 The parties shall make any further assurances as may be necessary to implement and carry out this agreement.
  6. 6 This agreement shall be governed by and construed in accordance with the law of Japan. The parties submit to the exclusive jurisdiction of the Tokyo District Court of Japan.
  7. 7 This agreement shall become effective immediately following execution by each of the parties.

Sample2 of Settlement Agreement

This Settlement Agreement is entered into this _______, 2020 by and between International Food Service Co., Ltd., (hereinafter “IFS”) and Yamada Sangyo Inc. (hereinafter “Yamada”) (collectively referred to as the “parties” or individually a “party”).

WHEREAS, certain controversies have arisen regarding the products sold from IFS to Yamada (hereinafter the “Controversies”); and,
WHEREAS, IFS and Yamada desire to resolve their dispute;
NOW THEREFORE, in consideration of the premises and mutual promises contained herein, the parties agree as follows:

  1. 1 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.
  2. 2 In full settlement of the Controversies, Yamada shall pay to IFS the sum of $10,000 (the “Installment Settlement Payments”) in four (4) equal installments of $2,500 which shall be payable, respectively, every month starting from the month of the execution of this Agreement.
  3. 3 In consideration for their faithful performance of the terms of this Settlement Agreement, the parties, for themselves, their officers, directors, executives, managers, employees, agents, attorneys, divisions, related and subsidiary entities, affiliates, successors and assigns, 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, 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.
  4. 4 This Settlement Agreement shall be binding upon and inure to the benefit of the parties’ respective heirs, successors, assigns and personal representatives.
  5. 5 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.
  6. 6 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.
  7. 7 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.
  8. 8 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.
  9. 9 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.
  10. 10 This Settlement Agreement may be executed in any number of copies, each of which shall be deemed to be a counterpart original.
  11. 11 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.