In Full And Final Settlement" …or Is It? (Properly Drafting Settlement Agreements)

Settlement agreements form an essential part of commercial debt repayments. By acting as a recording of the agreed terms of the repayment, such agreements are meant to provide certainty as to the intention of the parties. It is for this very reason that the terms of settlement agreements should always be in writing and be set out carefully to ensure that no disputes later arise.

To effectively cater to the negative consequences that may arise out of such agreements, it is advisable to include the following terms in a settlement agreement:

Payment of capital, interest and costs

Settlement agreements often arise as a result of legal steps having been taken. By this point legal costs will inevitably accrue to the debt. If summons has already been served by the time settlement has been negotiated, interest would have commenced as well. It is therefore vitally important to ensure that a settlement agreement confirms that repayment of not only the capital balance of