F. Interpretive Aids

• Library: Crafting Effective Settlement Agreements: A Guidebook for Attorneys and Mediators (ABA) (2018 Ed.)

F. Interpretive Aids

Yes, it's ironic to say, "Read these words exactly as we intend them." But not quite as ironic as saying, "Read these words as we did not intend them."

Most written settlements contain several (or even many) terms intended to govern how the agreement should be interpreted. These interpretive aids are intended for a judicial audience in the event that a court will be called upon to examine the agreement. Although these terms are not material terms without which a settlement agreement is void, they can play useful roles when parties move to enforce the terms of their deal.

1. Entire Agreement

Final written settlement agreements are usually preceded by oral communications that arguably constitute agreements, e-mail exchanges sufficient to identify all material terms of the parties' settlement, or preliminary agreements such as memoranda of understanding or term sheets. This practical reality counsels in favor of formally cancelling all possible prior agreements to leave the final written agreement as the only expression of the parties' settlement. A provision that expressly limits the settlement agreement to a single document eliminates confusion when there are prior versions floating around by the time of mediation. For this reason, in Daven v. Douglas the parties include the following provision:

17. Entire agreement. This is the entire agreement between the parties. This agreement cancels all prior written and oral agreements between the parties, whether made by the parties themselves or on their behalf by their legal counsel.

As with any aspect of a settlement, thoughtful analysis may yield the conclusion that a standard term does not fit the circumstance. For example, some settlement agreements require the integration of other documents when those documents describe such things as complex calculations for structured payouts, numerous property items to be transferred, or a detailed schedule of actions to be taken under the agreement. Thus, a settlement agreement may attach or incorporate other documents by reference.³¹³ If so, the settlement agreement should clearly refer to the extrinsic document, which should be physically attached to the settlement agreement.

2. Amendment or Modification

Another helpful term is to state that amendment or modification of the settlement agreement may be made only in a writing signed by all parties. This type of term discourages claims that the parties orally modified the settlement agreement. As an example, the attorneys in Daven v. Douglas drafted the following term that is intended to avoid unintentional amendment or modification of their settlement agreement:

18. Amendment and modification. This agreement may not be amended or modified except in a writing executed by all parties. A party seeking to modify this agreement shall provide written notice to the other party that describes the proposed change. The other party shall respond to the request no later than 10 days after receipt of the notice and shall not unreasonably withhold consent to...