What is a Legal Settlement?
Resolving a Legal Dispute through a Negotiated Settlement
Written by Jason Gordon
Updated at December 22nd, 2020
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What is the Settlement of a legal dispute?
A settlement means that the parties to a legal dispute work out their differences and enter into an agreement to resolve the situation.
Next Article: What is "Mediation"? Back to: ALTERNATIVE DISPUTE RESOLUTION
How Does a Legal Settlement Work?
By voluntarily entering into an agreement to resolve the situation, the parties enjoy numerous advantages over litigation.
First, the parties maintain control over the outcome of the dispute.
The parties are not subjected to a ruling, judgment, or award of a third-party decision-maker.
Businesses often settle legal disputes to avoid the high cost of litigation, maintain privacy, and to preserve the professional relationship with the other party.
Also, juries tend to show favor to individual plaintiffs to the detriment of businesses.
Individuals, on the other hand, settle disputes to avoid the long, tenuous litigation process and to make certain of some level of recovery.
- Note: Achieving a settlement is a core objective of mediation, which is discussed in a separate section.
Discussion: Can you think of any other benefits of privately settling a matter, as opposed to pursuing litigation? Can you think of any situations where the above benefits of the settlement are undesirable? (Hint: Think about situations where you want to get your message or reason for dispute out to the public.)
- There are various advantages of settling a matter and they include: It is cheaper compared to litigation; The relationship of the parties is preserved; It is faster compared to litigation; It get to the root cause of the disagreement thus prevent the occurrence of such an even again; It helps in keeping the affairs of the parties as private as possible compared to litigation. In cases involving the public interest, it becomes hard to settle and determine the matter peacefully and the above benefits be achieved. Further, in many instances, it is in the public interest for the facts of a legal dispute to be publicly known.
Academic Research on Legal Settlements
- Yousefi, Kowsar, and Black, Bernard S., Three-Party Settlement Bargaining with Insurer Duty to Settle: Structural Model and Evidence from Malpractice Claims (May 2015). nearly final version; Journal of Law, Economics and Organization, 2015, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1884744 or http://dx.doi.org/10.2139/ssrn.1884744