Settlement Agreements and Releases

Commercial Debt Collections Attorneys Serving Clients in New York and Beyond

Settlement agreements are contracts between parties that are engaged in a legal dispute. A release is also a contract, which releases someone from contractual liability after an agreed-upon sum is paid. Often, a settlement agreement and release are found in a single contract. They can be entered into before or after the filing of the complaint that starts litigation. Businesses in New York or beyond can consult the experienced commercial debt collections lawyers at Klapper & Fass to protect their rights when disputes arise from settlement agreements and releases.

How Settlement Agreements and Releases May Affect a Business

A settlement agreement and release defines each party's legal obligations. Many cases result in a settlement because litigation is so expensive. Both sides may have an incentive to settle cases if the evidence is not as clear, or if the possibility of actually getting paid is slim because the debtor has no assets. Usually, settlement discussions take place before and during the pre-trial litigation process.

A settlement agreement generally includes an introduction, recitals, definitions, terms of the agreement like information about payment and releases, and procedural terms, including where the settlement agreement will be enforced if necessary. In some cases, when a settlement can be reached it may be necessary to write a confidentiality clause into the agreement so that other businesses do not draw any conclusions about what a business is willing to settle for when trying to collect an outstanding debt. If a confidentiality clause is included, it is usually necessary to carve out exceptions so that the parties can disclose the settlement to a tax advisor, another attorney, an accountant, or others who provide professional services. In case enforcement of the agreement is necessary, the agreement should spell out that confidentiality will not be required in case it is necessary to enforce the agreement.

It is important to have the advice of an attorney about all aspects of the agreement, and especially the terms of the deal. Sometimes they are simple terms, such as an agreement to pay a particular amount of money in one lump sum in exchange for a release. Other times, they are agreements to pay a series of payments over time.

In an installment payment plan, a business will not want to give a release or dismissal before receiving full payment. It can be helpful to include a consent judgment clause and require the other party to submit an affidavit confessing to judgment. In this affidavit, the other party admits to liability on a debt or obligation, and if he or she defaults, the affidavit can be filed in the clerk's office to obtain a judgment by confession. Usually, the agreement will also describe the basis for the confessed debt. Once filed, the judgment can then be enforced in the same way that other judgments are enforced.

The debtor may ask for a clause that allows it to receive notice and an opportunity to cure a default. Generally, there is no harm in allowing for this clause because litigating to collect a debt is expensive and time-consuming.

The release is a critical provision of some settlement agreements. The business will have to decide whether only the lawsuit claims will be extinguished, or whether all claims will be extinguished generally, even those that just might exist. A general release may be preferred if there is only one deal or transaction between a plaintiff and defendant. However, if there are multiple transactions over time, it makes more sense to have a specific release of only certain claims.

Consult a New York Lawyer for Guidance During Litigation

Settlements are extremely common in commercial litigation. Although there are certain typical drafting concerns in all settlement agreements and releases, each deal is unique. When you are trying to enforce an agreement, moreover, you may need to retain litigation attorneys who understand how businesses in New York and elsewhere in the U.S. function. At Klapper & Fass, we provide legal services to clients throughout Nassau, Orange, Westchester, Dutchess, Rockland, and Suffolk Counties, as well as in other states such as Florida and Texas. Contact our office by calling 914.287.6466 or by completing our online form.