An out of court settlement means, an agreement reached between the parties in a pending lawsuit
that resolves the dispute to all parties’ mutual satisfaction, and occurs without judicial
intervention, supervision, or approval. Parties can come to a resolution using Alternative dispute
resolution, or ADR.
One example of an ADR is through negotiations. Negotiations are when disputing parties can
come together to discuss their differences and come to a resolution. Negotiations tend to be more
cost effective, can lead to resolutions faster, and come to a solution which can benefit both
parties and allow them to preserve their relationships since negotiations are usually not as
confrontational as taking ones’ case to the judiciary to resolve.
Another form of ADR is through the process of mediation, where a mediator; who is a neutral
party; can assist in reaching a settlement that is beneficial to all parties involved. Like
negotiations, using a mediator is less expensive than formal dispute resolution methods, is
private and confidential and can result in a resolution that meets the needs of all the parties
involved. ADRs’ however are only beneficial if all the parties involved are committed to finding
a resolution, and not to drag the process for a long time.
Arbitration is a method of ADR where a third person; who is called an arbitrator; appointed by
the parties, delivers a decision to resolve the dispute. Like a litigation, arbitration involves both
parties to submit their cases however the final decision is outside of their control. However,
unlike a litigation, in an arbitration, parties control the rules of conducting arbitration, its’ degree
or formality, privacy, timing, finality of the decision, and the arbitrator. Like the previous two
methods, arbitration is also cheaper than a litigation, and can be less time consuming as well.
People who use a mediator, usually tend to use the same person for arbitration as well.
Settling out of court does have its’ benefits. In the process of a divorce, a litigation can not only
be very expensive and time consuming, it can have a very negative impact on the family
members, especially when there are children involved. An out of court settlement can not only
save both the partners money, but the privacy, and non-confrontational approach can allow them
to go through a very difficult process with a lot more ease. Settling out of court can also be
beneficial to businesses, or people in the public eye, who would rather not let any disputes they
might be faced with, go public, because any negative publicity will hurt their business, or their
brand. There might even be instances where companies will prefer to settle out of court, and pay
a big amount in settlement, rather than going through the process of litigation, because negative
publicity in the long run will be even more costly.
An ADR would not be the best option when a party needs certain rules enforced on another
party. For instance, if a couple is separated/divorced who have children, and the parent who is
supposed to provide child support, but fails to do so, needs to be taken to court for litigation, so
the court can legally bind them to provide for the child, or face consequences. Criminal cases, or
fraud cases are legal issues that can’t go through alternative dispute resolution.
Courts would be reluctant to reopen cases that have been settled upon, is because the court can
claim that the party who agreed to the settlement in the first place should have tried to clearly
understand what they were agreeing to when they decided to take the settlement. This is exactly
