Settlement Agreements: Why Some Deals Don’t Stick

Television Education Network

Introduction

Settlement agreements are not always effective to bring the dispute between the parties to an end. That is they do not ‘stick’, despite the efforts of the parties, their advisers, or others associated with formation of terms.

The legal reasons found for this primarily are:

• the ‘agreement’ does not comply with contract law requirements for a binding contract; or

• the terms are not drafted to give effect to the intended course of conduct that one, or both of the parties, envisaged occurring, with ambiguity, error or some other cause leading to a different outcome than that intended.

However the underlying reason for a deal not sticking is that a party, or the parties view, of what is asserted to be the settlement agreement is not what they agreed or was prepared to agree to resolve the dispute.

This paper examines the rules applying to effective settlement agreements, provides examples of the errors that can lead to ineffective settlement agreements (that is, those that do not stick), considers some practices and traps associated with them and finishes with some tips to keep in mind when drafting these forms of agreements.

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