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What is a Deed of Settlement (2023 Update)?

What is a Deed of Settlement (2023 Update)?

Do you have a legal dispute and want to avoid the high stress and costs involved with going to court? Have you come to an agreement with the other party and want to make it legally binding? If so a deed of settlement could be an effective option.

In this article, we’ll explain what a deed of settlement is, why you should use a deed of settlement, what the important provisions of a deed of settlement are and other frequently asked questions.

Read along!

Table of Contents

What is a Deed of Settlement?

A Deed of Settlement, also known as a deed of settlement and release, is a legal document that outlines an agreement between disputing parties to settle a dispute. A deed of settlement is a popular alternative to litigation, and it contains legally binding terms the parties have agreed upon. These agreements usually prevent the parties from commencing further litigation since the settlement is considered to be final.

Litigation refers to the process or act of taking a case to be settled in a court of law. Legal proceedings such as litigation are generally very time-consuming and therefore take a great toll on both time and finances of both parties. For this reason, a Deed of Settlement can be a time and cost-effective way to resolve legal disputes.

Example of a Deed of Settlement

If there is an employment dispute between an employer and an employee, the parties could choose to use a deed of settlement instead of using litigation. This is beneficial as the parties can enter into negotiations instead of spending large amounts of money and time on legal proceedings, negotiations can be entered into. Through the negotiation process, each party will be provided with an opportunity to voice their issues and interest. 

As a result, the negotiation process will allow the parties to negotiate possible solutions and mutually agreed-upon terms instead of dealing with an adversarial situation in court. Furthermore, legal proceedings generally result in a win-lose situation where one party is dissatisfied with the outcome of the proceedings.

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What are the advantages of using a Deed of Settlement?

There are many advantages that come from executing a deed of settlement rather than using litigation to settle a dispute. These include the following:

  • Executing a deed of settlement can be a highly effective way of resolving and finalising a legal dispute. Unlike Court proceedings, both parties can have their interests met and finalise the matter in a ‘win-win’ manner. Being put down to the prior negotiations taking place
  • As the settlement allows parties to avoid court, this allows parties to avoid the stress and costs involved in litigation.
  • As most Deeds of Settlement include terms of confidentiality, this allows parties to settle their dispute without attracting publicity and to keep their legal issue and agreement private
  • Deeds of Settlement are a very flexible way of resolving disputes because parties have the freedom to agree to settle for what they wish. They can have their individual interests and needs met. Most of the time, this even includes satisfaction of both parties and a resolution without an admission of guilt

Why should you negotiate?

Entering into negotiations is a good idea and can sometimes be required by a court order before a trial can begin. However, it’s important to be aware that during the negotiation process, both parties will be required to make compromises. Therefore, each party generally won’t receive the terms they initially sought. 

Another benefit of entering into negotiations and using a deed of settlement is that you can avoid the delays that are typically associated with litigation. You should also be aware that even if you win your case in court, it’s unlikely that you’ll receive all of your costs in relation to the litigation process back.

What are the important provisions of a Deed of Settlement?

A Deed of Settlement usually includes the following components:

  1. A deed of settlement will outline the date the deed was created
  2. A list of the parties to the dispute and settlement
  3. A deed of settlement will contain ‘Recitals’ which will provide background information relating to the dispute, the relationship between the parties of the dispute and details about the dispute
  4. The next key component of a deed of settlement is known as the ‘Operative Part’. The operative part of a deed of settlement includes the following information: 
  1. Terms of Settlement- This section of the operative part will outline who is responsible for payments and the processes that will occur following the acceptance of payment. Furthermore, the deadline for the payment will also be outlined in this section
  2. The territory or state legislation that’s applicable to the deed
  3. Taxes 
  4. Confidentiality 
  5. Definitions- The deed of settlement will define the key terms that are frequently mentioned in the document  
  6. An execution page that includes the names and signatures of all parties to the deed of settlement and the names and signatures of the witnessing JP or solicitor.

What are the limitations of a Deed of Settlement? 

The limitations of a deed of settlement include the following:

  • A deed can’t bind any parties other than the parties to the deed 
  • A deed between two parties can’t serve to prevent the work of statutory agencies
  • A deed of settlement has no effect if it’s against public policy, opposed to law or if its purpose is to hide unlawful activity

What happens if there is a breach of a term of the deed by a party?

In the event that a party fails to fulfil its obligations pursuant to the deed of settlement, the other party can use the deed to enforce them. Alternatively, the party can choose to take the party that has failed to fulfil its obligations under the deed to court. Consequently, the court will demand payment from the party failing to meet its obligations.

A deed of settlement typically contains a release. The purpose of a release is to prevent a recurrence of the dispute. This is because, through the release, there is an agreement between the parties to release one another from all future claims, demands, and legal action.

Can you use a deed of settlement if your case is currently in court?

Even if there are existing legal proceedings for your dispute with another party, you can still use a deed of settlement. A deed of settlement can outline that the legal proceedings will come to an end. 

To protect yourself from a breach of a term of the deed of settlement, you should include a term that states the legal proceedings will continue in the event that there is a breach of a term. Similarly, you can include a term that legal proceedings will continue where a party fails to meet its obligations under the deed of settlement. 


A Deed of Settlement is often created through negotiations made between two parties outside of the court. A deed of settlement provides disputing parties with many benefits, such as avoiding engaging in litigation, allowing them to save time and money. 

If you’re in dispute with another party and you fail to form a Deed of Settlement, you can choose to use other alternative dispute resolution processes, such as arbitration or mediation, to resolve your legal disputes. If you require assistance with creating a deed of settlement or you want to learn more about other dispute resolution methods, you should hire a lawyer for legal advice.

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