ADR Settlement Agreement Drafting 2 — Questions and Answers
Question 1: Which clause in a settlement agreement prevents parties from making public statements that disparage each other?
- Non-disparagement clause (Correct answer)
- Confidentiality clause
- Release clause
- Choice of law clause
Correct answer: Non-disparagement clause
A non-disparagement clause specifically prohibits parties from making negative or derogatory statements about each other publicly.
Question 2: When a settlement agreement requires payments over time, which provision should specify consequences if a party misses a payment?
- Acceleration clause (Correct answer)
- Integration clause
- Severability clause
- Recitals clause
Correct answer: Acceleration clause
An acceleration clause makes the entire remaining balance due immediately upon a missed payment, protecting the receiving party.
Question 3: What is the purpose of including recitals at the beginning of a settlement agreement?
- To provide background context and the basis for the agreement (Correct answer)
- To establish the legal jurisdiction
- To define the payment schedule
- To list the attorneys involved
Correct answer: To provide background context and the basis for the agreement
Recitals provide narrative background explaining why the parties entered into the agreement and the dispute being resolved.
Question 4: A party wants to settle a lawsuit without admitting fault. Which provision accomplishes this?
- No-admission-of-liability clause (Correct answer)
- Indemnification clause
- Representation clause
- Waiver clause
Correct answer: No-admission-of-liability clause
A no-admission-of-liability clause explicitly states that the settlement does not constitute an admission of wrongdoing by either party.
Question 5: Which type of release in a settlement agreement waives all claims, including those the releasing party does not yet know about?
- General release (Correct answer)
- Specific release
- Mutual release
- Conditional release
Correct answer: General release
A general release extinguishes known and unknown claims, often requiring California Civil Code § 1542 waivers in California disputes.
Question 6: In drafting a settlement agreement, what does a 'covenant not to sue' differ from in a 'release'?
- A covenant not to sue is a promise not to file future suit, while a release extinguishes the underlying claim (Correct answer)
- A release allows future litigation while a covenant permanently bars it
- A covenant not to sue must be recorded while a release need not be
- A release requires court approval while a covenant does not
Correct answer: A covenant not to sue is a promise not to file future suit, while a release extinguishes the underlying claim
A release extinguishes the claim entirely, whereas a covenant not to sue is a contractual promise but does not eliminate the underlying right.
Question 7: Which provision ensures that if one clause of a settlement agreement is found unenforceable, the rest of the agreement remains valid?
- Severability clause (Correct answer)
- Integration clause
- Force majeure clause
- Recitals clause
Correct answer: Severability clause
A severability clause preserves the remainder of the contract when a court invalidates one or more provisions.
ADR Settlement Agreement Drafting 2
Which clause in a settlement agreement prevents parties from making public statements that disparage each other?