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    Compromise vs Amicable Settlement

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    928 views2 pages

    Compromise Vs Amicable Settlement

    Uploaded by

    aurea belen
    abc

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    A compromise is an agreement between two or more persons to amicably settle their dispute[i].

    It is a
    settlement of a disputed claim by mutual concession to avoid a lawsuit[ii]. The word compromise
    contemplates a mutuality of concessions for the purpose of the termination of litigation[iii]. Thus, a
    compromise is an agreement between two or more persons who, to avoid a lawsuit, amicably settle their
    differences on such terms as they can agree on[iv].

    A settlement agreement is defined as an agreement to terminate, by means of mutual concessions, a


    claim that is disputed in good faith or unliquidated. It is an amicable method of settling or resolving bona
    fide differences or uncertainties and is designed to prevent or put an end to litigation[v].

    A valid compromise and settlement, bars all right of recovery on the previously existing claim[vi]. This is
    so because the compromise agreement is substituted for the claim, and the rights and liabilities of the
    parties are measured and limited by the terms of the agreement. The previously existing claim is
    extinguished by the compromise and settlement and, as a result, any subsequent litigation based upon it
    is barred[vii].

    The purpose of a compromise is to prevent or put an end to litigation [viii]. To effectuate a compromise
    there must be, as its basis, a contest, dispute, or disagreement between the parties[ix]. The essential
    elements of a compromise are:[x]

    mutual intent to put an end to the litigation, and

    reciprocal concessions of the parties in adjustment of their differences.

    The basic element of a compromise is a disputed claim[xi]. Thus, to have an offer of compromise, there
    must be an offer to settle a dispute. It is essential to a compromise that there be mutual concessions or
    yielding of opposing claims[xii].

    There is no requirement that settlement should be authorized in writing, however, it is better to have
    signed authorization[xiii]. An oral authorization of settlement is not invalid or unenforceable.

    The courts consider four factors in deciding whether to approve a proposed settlement:[xiv]

    the probability of success in the litigation;

    the difficulties to be encountered in the matter of collection;

    the complexity of the litigation involved, and the expense, inconvenience and delay surrounding it;

    and

    the interests of the creditors.

    A valid compromise effectively abrogates and nullifies the prior claim or contract, which was compromised
    by it, so that the only legal recourse of the parties is to enforce their rights within the context of the
    compromise agreement[xv].

    In evaluating a proposed settlement, the courts make an informed, independent judgment that the
    compromise is fair and equitable[xvi].

    A compromise instrument is governed by the same general rules of construction applicable to


    contracts[xvii]. A compromise agreement, like other contracts, requires an offer and acceptance,
    consideration, and parties who have the capacity and authority to agree as they do[xviii].

    Compromise and settlement is a subcategory of the term accord and satisfaction[xix]. It differs from the
    latter in that any claim whether disputed, unliquidated, or undisputed and liquidated may be discharged by
    an accord and satisfaction, but only a disputed or unliquidated claim may be the basis for a compromise.
    The law favors compromises. Thus, a compromise and settlement is actually a type of an accord and
    satisfaction[xx].
    There is no compromise where the claim is undisputed and no concessions are made by the judgment-
    creditor[xxi]. Further, there can be no valid compromise unless each party believes in good faith that s/he
    is making a concession that is intended to terminate his/her dispute[xxii].

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