Settlement Agreements: Mutual Verses Unilateral
A settlement agreement, also called a release, is a binding contract that settles a lawsuit or potential lawsuit between two or more parties and stipulates that no lawsuit can be filed in the future. The courts encourage parties to resolve their dispute through a settlement agreement rather than through the courts. The two main types of settlement agreements are 1) mutual settlement agreement and 2) unilateral settlement agreement.
Mutual Settlement Agreement
The first type of settlement agreement is a mutual settlement agreement, or a mutual release. In a mutual settlement agreement, each party releases the other from the lawsuit or potential lawsuit. A mutual settlement agreement is the most common type of settlement agreement because it protects all parties from possible litigation in the future.
Unilateral Settlement Agreement
The second type of settlement agreement is a unilateral settlement agreement, or a unilateral release. In a unilateral settlement agreement, only one party is released. Unilateral settlement agreements are common in unfair labor disputes. Therefore, the party not released could face potential legal issues in the future.
Who is Released in a Settlement Agreement?
In a settlement agreement, the parties are releasing each other (or one party) from any claims that may arise out of the incident and any future claims that may arise from the incident. The settlement agreement needs to specifically state that the party or parties are released. Heirs, executors, and assignees can also be released in a settlement agreement, whether it be mutual or unilateral. For example, if a woman has heirs, such as two children and six grandchildren, those heirs can also be released so they do not become liable for any debts owed by their mother and grandmother.
What Needs to be in a Settlement Agreement?
Regardless of the kind of settlement agreement, it does need to contain the following 1) Full names of the parties joining and signing the release, 2) Specifics about the incident that put the parties in conflict, 3) The title of the lawsuit if a lawsuit is pending, 4) The consideration, and 5) Indicate exactly what the parties are releasing each other from.
The consideration is the monetary amount of the settlement and anything else either party agrees to. In essence, the consideration is what will end the dispute. For example, in a settlement agreement involving a car accident, the injured party may ask for the consideration of $50,000 in medical bills and $10,000 for their pain and suffering. They may also ask that person who damaged their car pay for the repairs to the car. Consideration does not strictly have to be a monetary amount. For example, in a business dispute that involves a settlement agreement, a business may agree to stop using a certain name because it is too close to the other business’ name.
Who is Liable in a Settlement Agreement?
When parties enter into a settlement agreement, they are not admitting liability, especially in a unilateral settlement agreement. The settlement agreement simply ends the dispute regardless of liability. A settlement agreement should always be in writing and signed by all parties involved.
If you need assistance in a civil dispute, local attorney Andrew Szocka provides thorough civil litigation help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. or call the office at (815) 455-8430.