Settlement agreements are an important part of dispute resolution mechanisms. A settlement agreement is an agreement between the parties agreeing typically to exchange some financial sum for the discontinuance of relevant dispute proceedings.
Great care must be exercised when drafting and entering into a settlement agreement since the purpose is to adequately agree and capture in writing a variety of different matters that both parties may have previously contested. Comprehensive and well thought out drafting is required to avoid a dispute on the matters where agreement was thought to be reached.
A common area for confusion in settlement agreements are schedules outlining non-legal technical matters. Particular care is required in the preparation of such schedules as in relation to the main body of the document. Often lawyers are reluctant to take responsibility for the schedules, which are developed by technical and commercial team members. Good communication between lawyers and commercial/technical members of the team is essential to ensure the main body and schedules of the agreement are aligned.
A settlement agreement will be applicable in the case of a negotiated solution between the parties, including mediation; and not typically in the case where a court, arbitrator, expert or DRB has made a determination or final decision. A settlement agreement may still be agreed prior to a final decision or in the final stage before a final decision is delivered, but the important distinction is that a settlement agreement is an agreed resolution between the parties, as distinct from a determination by a third party.
Significant settlement agreements should be subject to strict oversight from a governance perspective.