What is an Out-of-Court Settlement?
An Out-of-Court Settlement involves a matter being settled before a trial. According to Cornell Law School’s Legal Information Institute, it is “an agreement that ends a dispute and results in the voluntary dismissal of any related litigation.” It is a voluntary agreement that is considered legally-binding. When a settlement is reached, the related case is permanently dismissed, and any ongoing or upcoming trial must not occur or end.
Regardless of whether either party gets their desired terms in a settlement agreement, many choose to keep them private. The terms of an out-of-court settlement do not need to be disclosed to the public. They are typically negotiated by the parties’ lawyers, not the parties themselves.
Most legal disputes are settled outside of court rather than at trial. There are several different ways that settlements are decided, such as mediation, arbitration, or general negotiation. The result of a settlement is often one party paying the other a fraction of their original claim. However, one party settling and agreeing to make a payment is not an admission for fault. For instance, in a negligence case, the original defendant agreeing to pay the plaintiff part of their claim in an out-of-court settlement does not mean an acceptance of liability. The dismissal of a trial in a settlement also dismisses any guilt in a criminal case or liability in a civil case.
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