Settlement (litigation)

Lore & Background

A settlement is based on a bargain where a party gives up its ability to sue or continue a claim in exchange for the certainty written into the settlement. Courts will enforce the settlement; if breached, the defaulting party can be sued for breach of contract, and in some jurisdictions the original action may be restored. The settlement defines legal requirements and is often put in force by a court order after joint stipulation, or the parties may simply file a notice of dismissal if claims are satisfied.

Reader's Guide

Settlements are significant because the majority of legal cases are resolved through them rather than trial. Both sides often have strong incentives to settle to avoid costs, time, and stress, especially where a jury trial is available. Settlements can be confidential, which is controversial as it may allow damaging actions to remain secret, leading some jurisdictions to pass laws limiting confidentiality. In the United States, less than 2% of cases end with a trial, with 90% of torts and about 50% of other civil cases settling. Settlement agreements are normally private contracts, not court orders, except for consent decrees. In England and Wales, a Tomlin Order allows the settlement terms to remain confidential while the court order deals with procedural matters. The European Union's Court of Justice has ruled that a settlement agreement between a public body and a contractor could amount to a material contract amendment requiring a new tender.

Did You Know?

• A 'drop hands' settlement occurs when both parties agree to bear their own costs and walk away from the dispute.
• A 'global settlement' addresses both civil claims and criminal charges against a corporation or other large entity.
• In the United States, less than 2% of cases end with a trial; 90% of torts settle.
• Confidentiality is not possible in class action cases in the United States, where all settlements are subject to court approval.