How to Write a Settlement Agreement

How to Write a Settlement Agreement
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Facing a lawsuit is a challenging, oftentimes frustrating and sometimes even unnerving experience. The thought of a lawsuit going to trial only magnifies these emotions. Additionally, even if you feel you have a strong case, any time you face a trial and jury you run the risk of a judgment being entered against you. Therefore, you may decide to settle your dispute. A key element of a negotiated conclusion of your case is a settlement agreement. There is a specific procedure in place to write a settlement agreement.

Step 1

Negotiate the basic elements of a settlement of the dispute with the other party.

Step 2

Prepare a letter of agreement summarizing the points of the oral agreement reached. Because a settlement agreement takes time to draft, you do need to get the general points in writing immediately.

Step 3

Use the letter of agreement as the outline to draft the settlement agreement.

Step 4

List the parties to the contract in the first paragraph of the settlement agreement. If there is a lawsuit pending, include the caption from the case as well as the case number.

Step 5

Set forth the specific items of agreement negotiated between the parties. Place each point of agreement in a separate paragraph in the document for clarity.

Step 6

Include a clear statement that the settlement document is the entire agreement between the parties.

Step 7

Include individual signature blocks for all parties to the agreement.

Step 8

Execute the settlement agreement. Both parties need to sign the document. A notary public is not legally required. The parties can elect to sign the document in front of a notary public if they so desire.


  • The possibility exists that the settlement agreement itself might become the subject of dispute at a future point in time. Include within the document a statement that the law of an agreed to state will govern the interpretation of the agreement. Additionally, insert a clause that states any litigation brought in regard to the settlement agreement shall be in a court of competent jurisdiction in the state agreed to in the settlement agreement between the parties.


  • Consider retaining the services of an attorney to draft your settlement agreement. The local and state bar associations likely maintain a directory of attorneys in different practice areas. Contact information for these organizations is available through the state and local bar associations.

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