Policy Of Law To Encourage Compromise and Settlement

A settlement agreement is an agreement to terminate, by means of mutual concessions, a claim which is disputed in good faith or unliquidated[i].  It is an amicable method of settling or resolving bona fide differences or uncertainties and is designed to prevent or put an end to litigation.

Public policy favors settlement of litigation[ii].  It is well-settled public policy that settlement agreements are highly favored and will be enforced whenever possible[iii].  In Clark v. Kawasaki Motors Corp., U.S.A., 200 W. Va. 763 (W. Va. 1997), the court held that it is the policy of the law to uphold and enforce settlement contracts if they are fairly made and are not in contravention of some law or public policy.

Settlement agreements between parties to lawsuits are designed to put an end to litigation[iv].  The law favors the compromise and settlement of disputes without resort to litigation[v].  This view is applicable in courts of equity as well as in courts of law.  The courts have considered it their duty to encourage rather than to discourage parties in resorting to compromise as a mode of adjusting conflicting claims[vi].  In Joel v. Valley Surgical Ctr., 68 Cal. App. 4th 360, the court held that the courts are empowered to encourage settlements, thereby discouraging needless litigation and its attendant expense.

The law favors the voluntary resolution of disputes.  Accordingly, settlement agreements, including covenants not to sue, are encouraged by the court[vii].  In the absence of fraud or mistake, a settlement is as determinative of the parties’ rights and obligations as a judgment on the merits.  In M.H. Detrick Co. v. Century Indem. Co., 299 Ill. App. 3d 620 (Ill. App. Ct. 1st Dist. 1998), the court held that settlement agreements are encouraged and should be given their full force and effect.

The courts consider a settlement agreement as a contract, and construction and enforcement of settlement agreements are governed by principles of contract law[viii].  Accordingly, a settlement agreement is enforceable if there is an offer, an acceptance, and a meeting of the minds[ix].  If there is no ambiguity in the language of a settlement, the determination of the intent of the parties is governed by the contract language alone.

Settlement approval is within the court’s discretion, which should be exercised in light of the general judicial policy favoring settlement[x].  In determining whether to approve a stipulation for settlement, the court must first determine whether a valid settlement agreement has reached[xi].

In Leary v. Julian, 225 Ga. App. 472 (Ga. Ct. App. 1997), the court held that settlement agreements are highly favored under the law and will be upheld whenever possible as a means of resolving uncertainties and preventing lawsuits.  Further, an oral settlement reached between the parties is enforceable if the parties’ attorneys are vested with the power to enter into such agreements and do so before the court on behalf of the litigants, absent fraud, collusion, or express prohibition of such an agreement.  Thus, when it is undisputed that a settlement agreement is definite, certain, and unambiguous, the court is obligated to put an end to the litigation by making the settlement its own judgment[xii].

The Federal Rules of Civil Procedure provides that the court can direct parties and attorneys engaged in civil litigation to appear before a conference facilitating the settlement of the case[xiii].  Additionally, at any pretrial conference, consideration may be given and appropriate action may be taken with regard to settlement[xiv].  Further, Federal Rules of Civil Procedure authorizes the imposition of sanctions if a party or party’s attorney fails to participate in a pretrial settlement conference in good faith[xv].

[i] State Farm Fire & Cas. Co. v. Pacific Rent-All, Inc., 90 Haw. 315 (Haw. 1999)

[ii] Haderlie v. Sondgeroth, 866 P.2d 703 (Wyo. 1993)

[iii] In re Air Safety Int’l, LC, 326 B.R. 883

[iv] In re Frye, 216 B.R. 166, 172 (Bankr. E.D. Va. 1997)

[v] Stamie E. Lyttle Co. v. County of Hanover, 231 Va. 21(Va. 1986)

[vi] Sanders v. Roselawn Memorial Gardens, 152 W. Va. 91 (W. Va. 1968)

[vii] Castlewood Prop. Owners Ass’n v. Trepton, 720 N.E.2d 10 (Ind. Ct. App. 1999)

[viii] Emmons v. Superior Court, 192 Ariz. 509 (Ariz. Ct. App. 1998)

[ix] M.H. Detrick Co. v. Century Indem. Co., 299 Ill. App. 3d 620 (Ill. App. Ct. 1st Dist. 1998)

[x] In re Sumitomo Copper Litig., 189 F.R.D. 274 (S.D.N.Y. 1999)

[xi] In re Air Safety Int’l, LC, 326 B.R. 883

[xii] Leary v. Julian, 225 Ga. App. 472 (Ga. Ct. App. 1997)

[xiii] USCS Fed Rules Civ Proc R 16 (a) (5)

[xiv] USCS Fed Rules Civ Proc R 16 (c) (9)

[xv] Guillory v. Domtar Indus., 95 F.3d 1320 (5th Cir. La. 1996)


Inside Policy Of Law To Encourage Compromise and Settlement