Settlement – Definition

Cite this article as:"Settlement – Definition," in The Business Professor, updated January 7, 2015, last accessed July 7, 2020,
Video ThumbnailThis video explains the concept of settlement of a legal dispute.

Next Article: What is “Mediation”?


What is “Settlement” of a legal dispute?

Settlement means that the parties to a legal dispute work out their differences and enter into an agreement to resolve the situation. The benefit of a settlement is that 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. 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 apposed to pursuing litigation? Can you think of any situations where the above benefits of settlement are undesirable? Hint: Think about situations where you want to get your message or reason for dispute out to the public.

Discussion Inpu

  • 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 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 peaceful and the above benefits to be achieved. Further, in many instances, it is in the public interest for the the facts of a legal dispute to be publicly known.

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