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Settlement agreement · Delaware, United States, New York, United States, California, United States, United States (Federal)

Settlement Agreement (United States)

A settlement agreement for a commercial dispute between two businesses under Delaware, New York or California law: a settlement sum paid in one payment or installments, full and final settlement with a mutual or one-way release, no admission of liability, confidentiality, ending any proceedings, costs, warranties of authority and no assignment of claims, and acceleration on default.

Drafted with Mike, checked against 17 published references. Reviewed 26 October 2026.

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What it is

A settlement agreement is a contract that ends a commercial dispute between two businesses. This version is written for Delaware, New York or California law: one party pays an agreed settlement sum, in a single payment or in installments, in full and final settlement, with either a mutual release or a one-way release by the party that is paid. Neither side admits liability, and any pending lawsuit or arbitration is brought to an end.

When to use it

It suits business-to-business disputes, such as a contract dispute, unpaid invoices, defective goods or services, or a partnership or shareholder disagreement, before or after a case has been filed. It also covers releases of unknown claims, including a waiver of California Civil Code section 1542. It is not meant for employment claims, consumer disputes, settlements with more than two parties, settlements that transfer property or shares or restructure debt, or settlements that need court approval or involve a regulator.

Why use it

The template deals with the settlement payment and schedule, tax forms (IRS Form W-9 or W-8), costs, the scope of the settled claims, who is released, unknown claims and the section 1542 waiver, carve-outs for fraud and enforcing the agreement, no admission, confidentiality, optional non-disparagement, warranties, and acceleration and interest on default. To end a case it offers a stipulated dismissal with prejudice, or a dismissal in which the court keeps jurisdiction to enforce the deal. It treats the negotiations under Federal Rule of Evidence 408, and the parties pick the governing state, with its state and federal courts as the forum. Each releasing party settles its own claims; an affiliate’s claims are not released without that claim owner’s participation or actual authority. This commercial form is not a statutory employment waiver.

What it covers

  • Settlement of a commercial dispute between businesses (for example over a contract, unpaid invoices, defective goods or services, or a partnership or shareholder dispute) before or after proceedings have started.
  • Settlements where one party pays a sum, in one payment or by installments, with a mutual release or a one-way release by the party receiving payment.
  • Ending court or arbitration proceedings as part of the settlement.
  • Settlements governed by Delaware, New York or California law, including releases of unknown claims with a California Civil Code section 1542 waiver.

What it doesn't cover

  • Employment settlement agreements, or any settlement of an individual's employment or worker claims (which need statutory formalities); the release expressly excludes them.
  • Consumer disputes and settlements with individuals acting outside their business.
  • Settlements that transfer property or shares, grant licenses, or restructure debts on more than a simple payment schedule.
  • Class, collective, derivative, insolvency or other settlements that need court approval on the merits, and settlements with regulators or public authorities.
  • Settlements involving more than two parties, or claims against insurers that must consent.
MIKE'S TEMPLATES

Settlement Agreement (United States)

Parties

This agreement is dated the date on which it is signed by the last of the parties.

This agreement is made between [Party 1 legal name and details] (the "Party 1") and [Party 2 legal name and details] (the "Party 2").

Key Terms

"Dispute" means [Description of the dispute being settled].

"Proceedings" means [Court or arbitration proceedings being ended (forum and case number)].

"Settlement Sum" means [Settlement sum (amount and currency)].

"Payment Date" means [Date by which the settlement sum, or the first installment, must be paid].

"Installment Schedule" means [Installment amounts and due dates].

"Payment Account" means [Receiving Party's bank account for payment].

"Withdrawal Period" means 7 days after the Receiving Party receives the Settlement Sum in full.

"Grace Period" means 7 days.

"Default Interest Rate" means [Interest rate on late payments].

"Costs Contribution" means [Contribution to the Receiving Party's legal costs].

"Excluded Claims" means [Specific claims that are NOT settled].

"Agreed Statement" means [Agreed statement about the settlement].

"Governing State" means the State of [Governing law and court location (US state)].

Interpretation

Where a party is an individual, "it" and "its" include him or her, and "his" and "her"; a reference to a party's power and authority includes his or her legal capacity; a reference to a party's directors, officers or senior managers applies only to a party that is an entity; and an individual party may sign this agreement personally.

Background

The Dispute has arisen between the parties, and the claims made in connection with it are contested.

The Dispute is the subject of the Proceedings.

The parties have agreed to settle the Dispute on the terms of this agreement, to avoid the cost, time and uncertainty of continuing it, and without any admission of liability.

Settlement Payment

Party 1 (the "Paying Party") must pay the Settlement Sum to Party 2 (the "Receiving Party") in accordance with this Settlement Payment clause.

The Paying Party must pay the Settlement Sum in full, in a single payment, no later than the Payment Date.

Each payment must be made in cleared funds by bank transfer to the Payment Account, without any set-off, counterclaim, deduction or withholding except as required by law. A payment is made when the funds are received in the Payment Account. The Receiving Party must confirm receipt in writing promptly on request.

Each party is responsible for its own taxes on any amount it pays or receives under this agreement. Before the first payment, the Receiving Party must give the Paying Party a completed IRS Form W-9 or the applicable Form W-8, and the Paying Party may report the payment to tax authorities as the law requires.

Costs

Each party bears its own legal and other costs in connection with the Dispute, any proceedings about it, and the negotiation and performance of this agreement.

Settlement and Release

The terms of this agreement are in full and final settlement of the Settled Claims.

"Settled Claims" means all claims, demands, rights of action and liabilities of any kind, whether known or unknown, actual or contingent, present or future, and however arising, including in contract, tort or under statute, that arise out of or in connection with the Dispute, any proceedings about it, or the facts and matters giving rise to it, including any claim for interest or costs, but excluding the Excluded Matters.

"Released Persons" means, in relation to a party, that party, its affiliates, and its and their current and former directors, officers, employees and agents; and a party's affiliates are the persons that control it, are controlled by it or are under common control with it.

"Excluded Matters" means claims to enforce this agreement; any claim arising from fraud, fraudulent misrepresentation or dishonest concealment of which the party giving the release is unaware on the date of this agreement; any claim that cannot lawfully be released; and, where a party is an individual, any claim of that party arising out of his or her employment, or its termination, including any claim under the Age Discrimination in Employment Act of 1967 or any other federal, state or local employment or anti-discrimination law.

The Excluded Claims are also Excluded Matters, and nothing in this agreement releases or affects them.

With effect from the date on which the Receiving Party receives the Settlement Sum in full, each party, in respect of its own claims only, releases and forever discharges each of the other party's Released Persons from all Settled Claims.

Each party that gives a release under this clause must not, and must procure that its affiliates do not, start, continue or voluntarily assist in any proceedings against a Released Person of the other party in respect of a Settled Claim, except as required by law.

Each party that gives a release under this clause acknowledges that it may later discover facts or claims in addition to or different from those it now knows or believes to exist, and intends the release to apply to Settled Claims of which it is unaware on the date of this agreement, subject only to the Excluded Matters.

Each party that gives a release under this clause expressly waives, to the fullest extent permitted by law, the benefit of Section 1542 of the California Civil Code, and of any similar law of any jurisdiction, in relation to the Settled Claims. Section 1542 provides: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY." Each such party acknowledges that it understands the effect of this waiver and has had the opportunity to take legal advice on it.

Each Released Person who is not a party is an intended third-party beneficiary of the release and this clause and may enforce them, but the parties may vary or end this agreement without the consent of any such person.

No Admission

This agreement is a compromise of disputed claims. Nothing in it, and nothing done under it, is an admission of liability or wrongdoing by any party, and neither party may rely on it as evidence of liability, except in proceedings to enforce it.

Ending the Proceedings

Within the Withdrawal Period, the parties must sign and file a stipulation of dismissal of the Proceedings, including any counterclaim, with prejudice or, where the court's approval is required, a joint motion for dismissal with prejudice, with each party bearing its own attorneys' fees and costs except as this agreement provides.

Until the Proceedings have ended or been stayed under this agreement, the parties must not take any further step in them except to ask the court or tribunal to stay them, extend time or vacate any hearing so as to give effect to this agreement, and must make any such request jointly where needed. This does not prevent a party from applying to the court to enforce the terms of this agreement under any permission to apply given in the order that stays the Proceedings.

Status of Negotiations

The negotiations that led to this agreement were confidential settlement communications, to which Rule 408 of the Federal Rules of Evidence and any corresponding state rule apply. The parties intend this agreement to be binding and enforceable, and either party may produce it in any proceedings to enforce it or to show that the Dispute has been settled.

Confidentiality

Each party must keep the terms of this agreement, and the negotiations that led to it, confidential, and must not disclose them except to its affiliates, professional advisers, auditors, insurers and financiers who need to know them and are bound to keep them confidential; as required by law, a court, a regulator or the rules of a stock exchange; to a tax authority; to enforce this agreement; or with the other party's written consent. Either party may say that the Dispute has been resolved to the parties' mutual satisfaction.

Either party may make the Agreed Statement in response to an inquiry about the Dispute. Neither party may make any other public statement about the Dispute or its settlement without the other party's written consent, and this takes priority over any statement the Confidentiality clause would otherwise permit.

Non-Disparagement

Each party must not make, and must take reasonable steps to ensure that its directors and senior managers do not make, any statement to a third party that is intended or reasonably likely to disparage the other party or its Released Persons in connection with the Dispute. This does not restrict any disclosure permitted by the Confidentiality clause, any statement required by law or made in legal proceedings, or any report to a regulator or law enforcement authority.

Warranties

Each party warrants to the other that it has full power and authority to enter into and perform this agreement, that it has obtained every consent and approval it needs to do so, and that the person signing on its behalf is authorized to do so.

Each party warrants to the other that it has not sold, assigned, transferred, charged or otherwise disposed of any Settled Claim it releases, or any interest in one, and that, so far as it is aware, no other person is entitled to bring such a claim in its name or on its behalf.

Each party warrants to the other that, apart from any proceedings referred to in this agreement, neither it nor, so far as it is aware, any of its affiliates has started any proceedings against a Released Person of the other party in respect of a Settled Claim.

Each party confirms that it has had the opportunity to take independent legal advice on the terms and effect of this agreement, and that it enters into it freely.

Default

If the Paying Party does not pay any amount due under this agreement in full within the Grace Period after its due date, the Receiving Party may by written notice declare the whole unpaid balance of the Settlement Sum immediately due, and the Paying Party must pay it immediately. The Receiving Party may then recover the unpaid balance as a debt, together with its reasonable costs of recovery. The Receiving Party's remedy for non-payment is to enforce this agreement, and it may not pursue the Settled Claims themselves.

Any amount not paid when due under this agreement carries interest at the Default Interest Rate from its due date until the date of payment, both before and after any judgment, but not more than the maximum rate permitted by law.

Notices

A notice under this agreement must be in writing and delivered by hand, by reputable courier or by email to Party 1 at [Party 1 notice address and email] or to Party 2 at [Party 2 notice address and email], or to any replacement address notified in accordance with this clause. A notice is received when delivered by hand or courier or, for email, when it is sent unless the sender receives a delivery failure message; a notice received outside normal business hours in the place of receipt is treated as received at the start of the next business day. This clause does not apply to the service of legal proceedings.

General

This agreement is the entire agreement between the parties about the settlement of the Dispute and replaces all earlier negotiations, discussions and agreements about it. Each party acknowledges that in entering into this agreement it has not relied on any statement, representation or assurance that is not set out in it, but nothing in this clause limits liability for fraud.

Each party must, at its own cost, sign any document and do anything else reasonably required to give full effect to this agreement.

Neither party may assign any of its rights under this agreement without the other party's prior written consent. A variation of this agreement is effective only if it is in writing and signed by or on behalf of both parties. A waiver is effective only if it is in writing and applies only to the circumstance for which it is given. If any provision of this agreement is invalid or unenforceable, the rest of this agreement remains in force. Except as the Settlement and Release clause provides, there are no third-party beneficiaries of this agreement. This agreement may be signed in counterparts and by electronic signature.

Governing Law and Jurisdiction

This agreement, and any dispute or claim arising out of or relating to it, is governed by the laws of the Governing State, without giving effect to any choice-of-law rule that would apply the laws of another jurisdiction. Each party irrevocably submits to the exclusive jurisdiction of the state and federal courts located in the Governing State for any action arising out of or relating to this agreement, and waives any objection to venue in those courts, except that an action to enforce this agreement may also be brought in any court that heard proceedings about the Dispute and has retained jurisdiction to enforce it.

Where proceedings about the Dispute are pending, the parties request that the court retain jurisdiction over them, under any procedure the law of the Governing State provides for enforcing a written settlement signed by the parties (in California, section 664.6 of the Code of Civil Procedure), so that on motion it may enter judgment in the terms of this agreement, until this agreement is performed in full.

EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT.

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