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What Is a Settlement Agreement?

A Settlement Agreement is a contractual agreement between parties to actual or potential lawsuit by which each party agrees to a resolution of the underlying argument. A Settlement agreement is most common in civil cases such as divorces or lawsuits. It is a legal document which indicates the terms of a settlement. A settlement is an agreement between the disputing parties about a legal case; a settlement agreement is completed either before or after the court hearing begins.

The settlement is discussed and reviewed by all the parties to guarantee that the document is complete and accurate, and then it becomes a legal contract once all parties agreed and signed in. This discusses the terms for all parties involved. When people anticipate legal action, they decide to settle to avoid a more complicated procedure. They tend to negotiate and agree where both parties will settle.

For example, a divorce settlement agreement usually contains a division of property, real estate and other materials which may also be called a property settlement agreement. For a divorce that includes children, a settlement agreement may also contain custody, shared expenses and other issues with regards the children. Completing a settlement agreement may avoid the expense of court proceedings. Another example is a company who is threatened by a lawsuit and wants to keep its name clean and out of the public. The person filing the lawsuit may be offered a sum of money if he agrees not to sue the company. As part of the settlement agreement he may be asked to sign a confidentiality cause so that he would not be allowed to bring the issue up in the public and so the company would be able to protect its reputation.

In order for the settlement agreement to be legally binding, it must be transformed to a judgment and signed by a judge.

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