Settlement (litigation)
A contract-based resolution of legal disputes without trial.
A settlement in litigation is a resolution between disputing parties about a legal case, reached either before or after court action begins. It is a contract between the parties and a common result when parties sue each other in civil proceedings, allowing plaintiffs and defendants to end the dispute without a trial. The contract is based on a bargain where a party forgoes its ability to sue or continue a claim in return for certainty written into the settlement.
- field
- Law
- known_for
- Resolution of legal disputes without trial
- type
- Legal concept
- common_usage
- Majority of cases decided by settlement
- key_feature
- Contract between parties enforceable by courts
Lore & Background
A settlement is a contract that courts will enforce; if breached, the party in default could be sued for breach of contract, and in some jurisdictions the original action could be restored. The settlement defines legal requirements of the parties and is often put in force by a court order after a joint stipulation. In other situations, such as when claims are satisfied by payment, the plaintiff and defendant can simply file a notice of dismissal. Most cases are decided by settlement, as both sides often have strong incentives to avoid the costs, time, and stress of a trial, particularly where a jury trial is available. One side or the other will typically make a settlement offer early in litigation, and parties may hold a settlement conference, which the court may require.
Reader's Guide
Settlements are significant because they resolve the vast majority of civil lawsuits, with empirical analysis finding that less than 2% of cases end with a trial, 90% of torts settle, and around 50% of other civil cases settle. In American law, settlement agreements are normally private contracts, not court orders, except for consent decrees, which are relatively uncommon. Confidentiality is common in settlements, but controversial as it can allow damaging actions to remain secret; some states have passed laws limiting confidentiality, such as Florida's 'Sunshine in Litigation' law. In England and Wales, a standard procedure consent order known as a Tomlin Order allows the actual terms of the settlement to remain confidential in a schedule 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 in some cases amount to a material amendment to their contract, requiring a new tender under public procurement legislation.
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 or compromises both civil claims and criminal charges against a corporation or other large entity.
- In the United States, confidentiality is not possible in class action cases, where all settlements are subject to court approval.
- A Tomlin Order in England and Wales allows settlement terms to remain confidential in a schedule while the court order handles procedural matters.
Frequently Asked Questions
What is a settlement in litigation?
A settlement is a mutually agreed-upon contract between the parties in a legal dispute that resolves their conflict without requiring a court trial. It functions as a bargain in which each side gives up the right to keep litiating in exchange for a guaranteed, written outcome.
When can a settlement be reached in a civil case?
Parties may negotiate a settlement at any point—before a complaint is filed, during active court proceedings, or even after a verdict is rendered. There is no fixed deadline, so the resolution can occur whenever both sides decide the terms are acceptable.
Why is a settlement enforceable by courts?
Because a settlement is fundamentally a contract, it carries the same legal weight as any other binding agreement. If one party walks away from the deal, the other can bring a breach-of-contract action, and the court will compel performance or award damages.
Why do the majority of civil cases end in settlement rather than going to trial?
Settlements eliminate the uncertainty of a jury verdict, reduce legal costs, and let both sides control the terms of the outcome. For plaintiffs and defendants alike, a guaranteed result written into a contract is often preferable to the risk and expense of a full trial.
What is the key difference between a settlement and a court judgment?
A judgment is imposed by a judge or jury and reflects the court's determination of liability and damages, whereas a settlement is a voluntary agreement the parties craft themselves. In a settlement, each side trades its right to sue or defend for the certainty of the agreed terms, rather than having a third party decide the outcome.
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