Settlement agreement - what elements should it consist of?


Settlement agreement - definition

As a reminder, let us explain that by the concept of a settlement we mean an agreement concluded between the parties - the creditor and the debtor - in which both parties make certain concessions to each other in order to amicably perform an obligation or settle a dispute arising between them. There are usually two types of solutions in such an agreement. One is to divide the liability into installments, and the second (less frequently used) debt cancellation in exchange for a one-off repayment of part of the liability. Below we explain what the settlement agreement should contain.

What elements should a settlement agreement consist of?

Let us now indicate what should be included in such a settlement agreement so that it is properly drawn up.

  • specification of the type of contract, the time in which it is concluded and the place of its conclusion;

  • designation of the parties to the contract by using the words "creditor" and "debtor". In the case of persons representing the other party to the contract, it is worth requesting that they submit the authorization (power of attorney) or an excerpt from the National Court Register, because we will be sure that the other party is properly represented. This is an important issue as the contract concluded in breach of the principle of representation will result in its nullity;

  • precise specification of the claim covered by the agreement, together with the basis on which the claim arises (e.g. due to an unpaid invoice) and its cash value. In this case, you can use a ready-made formula with the following content:

"The debtor declares that he is entitled to an undisputed and due financial claim against him in respect of ................................. ........................., which amounts to ......... PLN. "

  • specifying the date and method of repayment of the debt, specifying the number of installments, frequency of repayment of installments (weekly, monthly, annually, etc.), monetary value of individual installments, date of payment of individual installments);

  • if the creditor decides to partially discharge the debtor from the debt, instead of dividing the repayments into installments, he should indicate under what conditions the debtor is released from the obligation;

  • signatures of persons mentioned at the beginning as entitled to represent both parties.