A good settlement agreement should clearly define the effect the agreement will have on future and current claims, and whether it applies to all claims between the parties, or only those claims arising out of a particular agreement or set of circumstances.
The article discusses a dispute between Standard and Poor and Parmalat. Standard and Poor’s agreed to pay Parmalat €14.5m ($16m) to settle a dispute over ratings it issued before the Italian dairy’s 2003 collapse. Parmalat initially sought more than €4 billion in damages from Standard and Poor’s, but eventually settled for the lesser sum of €14.5 million.
The settlement was noted to have the effect of precluding any present, future, current and/or potential claim or finding of any nature, in any case connected or related to the issues arising from the mentioned ratings of the litigation proceedings. Therefore, the release was limited to claims arising out of the particular ratings, and did not extend to all possible dealings between the parties.
Takeaway:
- The scope of a settlement agreement should be carefully defined.