Settlement Agreement Template
A settlement agreement records the deal that ends a dispute or debt — what is paid, on what terms, and that the matter is then closed.
What's included
- Understand what a settlement agreement is for
- Capture the settlement sum, timing and release clearly
- See why finality wording matters
- Distinguish settlement from a simple payment plan
- Know when to have the settlement reviewed
8 min read
The template
This general template records a negotiated settlement of a debt or dispute. Replace each [placeholder] to fit the deal you have reached.
SETTLEMENT AGREEMENT
Parties: [Party A] ABN [ABN] and [Party B] ABN/ACN [number]
Date: [Date]
A. Background
A dispute/debt has arisen concerning [brief description].
The parties wish to resolve it on the terms below without
admission of liability.
B. Settlement sum
Party B will pay Party A [$amount] ('the Settlement Sum')
[in full by [date] / by instalments per Schedule 1].
C. Method
Payment to [BSB/account], reference [reference].
D. Release
On payment of the Settlement Sum in full, the parties release
each other from all claims arising out of the matter described
in Background A.
E. Default
If the Settlement Sum is not paid as agreed, the release does not
take effect and Party A may pursue the full original amount.
F. Confidentiality / costs
[Optional clauses — bear own costs; keep terms confidential.]
Signed: ______________ (Party A) ______________ (Party B)Finality is the point
The value of a settlement is that it draws a line under the matter, so the release clause is the heart of the document. Equally important is the default position: a well-drafted agreement makes the release conditional on full payment, so a customer who settles cheaply and then defaults does not also get to keep the discount. Decide whether you are settling "without admission of liability" — common where there was a genuine dispute.
How to use it
Only sign once the numbers and dates are final, and make sure the person signing for the other side has authority to bind it. Keep the executed agreement and the proof of payment together. If the settlement involves staged payments, treat the schedule like an instalment plan and diarise each date. Where the underlying account is still open and unsettled, you can always refer the debt rather than discount it — escalation is sometimes the better commercial answer.
Not legal advice
This is a general template and general information only — not legal advice. A settlement extinguishes rights, so the wording matters and mistakes can be costly. Have any settlement agreement reviewed by a lawyer before you sign it.
Tips
- A settlement records the deal that ends a dispute or debt.
- The release clause is what gives it finality.
- Make the release conditional on full payment.
- Because it extinguishes rights, get it reviewed.
FAQ
What does 'without admission of liability' mean?
It records that settling is not an admission of fault — common where liability was genuinely disputed. Whether to include it depends on the matter. This is general information, not legal advice.
Should the release be conditional on payment?
Usually yes. If the release is unconditional and the other side then defaults, you may have given up your claim for nothing.
Is a full and final settlement letter the same thing?
It is a lighter-touch version for simpler debts. See the separate full and final settlement letter template.
Templates are a head start — not legal advice
Customise to your business and have important documents reviewed. Need to recover a debt? We can help.