A Primer on Settlement and Release Agreement Templates
Settlement and release agreements are formal contracts that lay out the details of how one or both parties agree to settle their claims against each other, or against a third party for whose actions one of the parties may be liable for. In such situations, the party that is bound by a settlement and release agreement will release the other party from any future claims and all claims up to the date the agreement is signed. The primary reason why such agreements are signed is to avoid the expenses and delays that are common in the litigation process. However, it provides both sides with assurances that they will not be sued again for the same issues or claims that are contained within the settlement.
For instance, you may have a workplace dispute between an employee and the employer. These disputes happen frequently and involving many issues. While the dispute may not make sense to any employer – or litigation may be unpredictable and involve even more expenses – an employee may be frustrated enough to sue the employer. For the sake of convenience and expenses , both sides may agree to reach a settlement. That settlement would then be formalized into a settlement and release agreement. Pursuant to the agreement, the employee may receive a monetary settlement, typically a sum that is significantly less than what he or she may have received if the case was fully litigated. In return, the employer would ensure that the dispute is over and no longer actionable in any form. One of these forms is having the employee waive the right to sue for any issues that are related to the workplace that gave rise to the original dispute, such as claims that may have been unintentionally forgotten.
In such scenarios, the settlement and release agreement remove the risk of exhausting costly legal resources, especially with no guarantees. For example, even if the employee won, there is always the chance that the employer could appeal the case and win the next time around. In addition, appeals can take years to address, so a potential victory in court may not happen until after a few years have passed.
Elements of a Settlement and Release Agreement Template
A standard settlement and release agreement template will typically include the following components:
Parties: The names of the specific parties who are named and who have agreed to settle and to such terms are vital to the enforceability of an agreement. Release validity is generally contingent on clearly identifying the parties involved. If there are multiple parties, all must be considered in the agreement.
Agreement and Release of Liability: Each party named in the settlement and release agreement template will be asked to agree not to seek legal recourse for any perceived losses, damage or injury resulting from the specified incident or action.
Indemnification: All costs to pursue an agreement must be reimbursed by the plaintiff, including attorney fees.
Governing Law: The state or jurisdiction that governs an agreement must be clearly identified. This will determine which laws apply to the agreement and how they are interpreted.
Entire Agreement: A settlement and release agreement template should also include clear language stating that it is the entire agreement and supersedes any previous and/or future agreements that have been or may have been reached. It should also stipulate that accepting payment is an acknowledgment of the agreement and that the settlement will not be construed as a, "gift".
Severability Clause: This clause should specify that if any portion of the settlement and release agreement template is found to be invalid, this will not affect the rest of the agreement.
Advantages of a Template
Using a pre-formulated settlement and release agreement template provides many benefits. Time savings is one of the main advantages. Typically, what would take several hours to draft by hand is just a fill-in-the-blank exercise with a template. Save time in other ways, too. Using a template simply saves research time. Even if you are an attorney, if the release agreement is for a different jurisdiction than where you usually practice, you may need to do some research. Because most templates are in PDF form, you are actually saving money. Instead of paying for a printed template and postage or paying for printing and your time spent at the office or at the post office, you can email the template to yourself or a colleague.
A template can aid the drafter in legal compliance. Make sure you check the state where the agreement is being drafted. Some states require certain words or a certain date for the signature lines. If the job is outside your jurisdiction, make sure you obtain a release that fits. If you use a generic agreement, you run the risk of having it deemed either void (for being executed out of jurisdiction) or non-binding (for not having the correct signed date). You run the risk of having to defend an unwritten contract or losing a claim that wasn’t released.
A pre-drafted agreement can make you look good to your clients. Can you imagine the appreciation from someone to whom you want to sell something if you give them a free template they can use over and over? The template is not an agreement that you’ve drafted for this particular client. It’s a pre-drafted agreement with all the terms left blank. It saves the customer time and worry about whether he/she has all the right terms in the agreement. Additionally, you don’t have to have the worry about whether you were missing any terms. You are confident the template has everything you normally need. For example, if your company does a lot of volunteering, you could use a pre-drafted liability waiver that is general enough that you can use it for any event.
Another benefit is accessibility. The documents are generally accessible on a firm’s website and open to modification. Sometimes a settlement agreement and waiver template will include specific requirements and the drafter can choose to keep the specific intact and just plug in the general terms. Other times, the drafter can modify the template so that it contains only general words. Templates are essential when clients have a loose idea of what they want the document to say but don’t have the resources to hire an attorney. Better safe than sorry.
How to Personalize Your Template
When presented with a template, the first step is to identify the variables within the agreement that will need to be customized. Are there any areas that are fact specific? Would a state or federal statute need to be cited as the basis for the stipulated amount or as support for the implementation of a settlement? More often than not, an analysis of the variables will produce a list of items that need to be customized.
Here is a list of common elements that can be supplemented when customizing a template:
- Payment Plan. The template may have a lump sum payment option or a lump sum payment plus ongoing monthly payments. If the agreement is a lump sum payment package, remove the payment schedule and insert the payment option that reflects that package.
- Use/use and in-kind definitions. Depending on the parameters of the settlement, defined terms may need to be added or removed. For example, some settlements provide for use/use and repairs (in-kind). The defined term may need to be removed altogether or customized.
- Signature block. The requirement of a judicial signature may need to be removed if a judicial signature is not necessary. For example, if you are settling a small claim in municipal court, the signature of the judge may not be necessary.
- Notice/receipt. Removal of a notice requirement may be necessary. In some cases notice is not required after full performance under the agreement.
- Language revisions. Some courts prefer specific language. The attorney should be familiar with which courts mandate specific releases.
These are just a few tips to remember when working with a settlement and release agreement template.
Ten Pitfalls To Avoid
While settlement and release agreement templates can be a useful tool, it is important to be aware of the potential pitfalls in order to avoid making costly mistakes. Here are some common errors to look out for:
- Not customizing the template to fit your specific situation: Many people assume that a template will be a one-size-fits-all solution. However, every case is different, and it is essential to modify the template to reflect the unique circumstances.
- Not including all necessary details: A release agreement should be as comprehensive as possible to ensure both parties understand the scope of their agreement. For example, make sure to include language addressing any non-compete or non-solicitation obligations as well as confidentiality obligations.
- Failing to include the date of the injury, illness , or termination: This is necessary in order to make sure the statute of limitations does not run out before you decide to pursue your claim.
- Using outdated language: Just because a template was legally binding 10 years ago does not mean that the same language will hold up in today’s courts. Be sure to use relevant and up-to-date language in your agreement.
- Not following state and federal guidelines: Ideally, you want a settlement that is ironclad. To accomplish this, it is important to seek guidance from the Department of Labor and either the EEOC or ADA if you are dealing with an allegation involving one of these federal agencies.
- Not seeking legal counsel: Humans are creatures of habit and can grow so comfortable using a certain template that they don’t think twice about using it and assume it covers all of the bases. We recommend having a knowledgeable attorney in employment law review each agreement before you send it off.
Legal Consequences and Considerations
Whether you are drafting a settlement agreement template or simply learning about its importance, understanding the legal implications it carries is essential. One of these implications involves enforceability. Although release clauses in general are up for interpretation by the courts, a well-crafted settlement agreement also allows you to make sure that:
• The agreement is enforceable under applicable law in your relevant jurisdiction, such as California.
• You comply with state and federal laws when making restrictive covenants, such as non-disclosure or non-solicitation agreements.
• You create a written record that establishes (and avoids disputes over) the validity of any written agreements.
• You define parameters for an arbitrator or the court to analyze the settlement agreement template.
Because of the complicated legal implications and considerations, it is best to seek legal advice. A lawyer experienced in settlement agreements can provide you with useful insight into the legal implications of your specific situation and provide a settlement agreement template that is better tailored to your needs.
Common Queries
In order to help you even more, I have posted answers to some frequently asked questions about settlement and release agreement templates.
Question: Do it yourself forms are OK to use instead of hiring an attorney?
It may be less expensive to use do it yourself forms, but you will be on your own in dealing with any issues that arise. Expect it to take longer for the matter to be resolved. The attorney may have liquidated damages provisions in their agreement that if both parties do not follow the money damages amount is very substantial. You must comply with all of the provisions in a do it yourself agreement or else the opposing attorney may say that you have breached the agreement. Most attorneys have different forms for various agreements so it is better to negotiate the terms of an agreement and then have the attorney draft up the details in an agreement and have both parties sign the agreement.
Question: What happens if one party or both parties do not live up to the contract?
If you are the wronged party, file a motion with the court to enforce the judgment. If it is a valid judgment or court order, the court will enforce it. If the contract is not a court order then a motion can be filed with the court to enforce the contract. If you obtain a judgment as the result of the judgment debtor signing an agreement you have 90 days from the date that the agreement is signed to file a motion seeking to have the judgment entered with the judgment amount as the damages amount in your agreement. Once the judgment is signed, it is especially important to pay attention to the tone of your emails. Also, do not engage in argument with the other party as it may be used as evidence in court.
Question: Will I save money doing my own contract without an attorney?
In the long run , it is best to have an attorney do it to ensure that it is drafted properly. If you set the damages amount in agreement to be the total amount of the judgment and then agree to allow the debtor to pay a smaller amount provided that the debtor abides by the contract, you may be stuck. It is best to assume that the other side is broke and then make them comply with the agreement. Put in the name of each party, their respective addresses, phone numbers, and any other contact information.
Question: What does this cost to have an attorney draft a simple agreement?
Prices vary, but attorneys in general will charge less than they normally would for a contract that is general in nature and for a contract that is specific to enforce a legal right or to get some action done. The judges often run out of the courtroom because they know that they have to deal with the do it yourselfers who do not know how to do it properly and then they have to stop what they are doing to listen to each side. The judge has to tell the unrepresented party why the motion is being denied and how to fix the problem, which can take many minutes. Going to a hearing can take 2 hours and it was for 10 minutes of work the judge is frustrated because of the wasted time. The judge will have to listen to the party crying who do not know what motions to file at the hearing. Both parties will need to be prepared for all potential objections when filing motions. Use an attorney to avoid more costs later on.
Question: How long does it take to resolve a civil judgment?
While most civil judgments can be resolved within 120 days, defendants will often try to delay matters, which may take months to resolve. If the judgment is for goods sold, the other party may be less likely to delay because the plaintiff is able to get the goods and will sell them to third parties.