Settlement Agreement Template & Guide for Small Claims
Reach a binding settlement without going through a court hearing
Last updated: April 2026 | Reading time: ~6 minutes
⚠ Disclaimer: This template is for educational purposes only and is not legal advice. Adapt it to your specific circumstances and consult an attorney if needed.
What Is a Settlement Agreement?
A settlement agreement is a legally binding contract between two parties in a dispute. In it, the parties agree on terms to resolve the dispute, including the payment amount, schedule, and other conditions. A settlement agreement saves both parties the time, money, and stress of going to trial. It is one of the most practical tools available in small claims disputes.
Settlement agreements can be used at any stage of a dispute: before a lawsuit is filed, during mediation, before the court hearing, or even after a judgment has been entered. In fact, many small claims cases are settled before they ever reach a judge.
When to Use a Settlement Agreement
- Before filing a lawsuit — When the defendant is willing to pay some or all of the amount owed after receiving a demand letter
- During mediation — When both parties reach an agreement through a mediator (some states require mediation before trial)
- Before the hearing — When the parties negotiate a resolution before the scheduled court date
- After judgment — When the parties agree on payment terms for a court-ordered judgment
Key Terms to Include
- Party information — Full legal names and addresses of both parties
- Description of dispute — A brief description of the dispute being resolved
- Settlement amount — The agreed-upon dollar amount
- Payment schedule — When and how payment will be made (lump sum or installments)
- Release of claims — A statement that both parties release each other from further claims related to this dispute
- Confidentiality clause — Whether the terms of the agreement will be kept confidential (optional)
- Breach provisions — What happens if either party fails to comply with the agreement
- Signatures — Signatures of both parties and the date
Sample Settlement Agreement Template
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement ("Agreement") is entered into as of [Date] by and between:
Party A (Claimant): [Full Legal Name], residing at [Full Address]
Party B (Respondent): [Full Legal Name], residing at [Full Address]
RECITALS: A dispute has arisen between the parties regarding [brief description of the dispute — e.g., "the return of a security deposit for the property at 123 Main Street" or "payment for services rendered in March 2026"]. The parties wish to resolve this dispute amicably without further litigation.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:
1. Payment. Party B agrees to pay Party A a total of $[amount] as full and final settlement of all claims related to the above dispute.
2. Payment Schedule. Payment shall be made [in a single lump sum by (date) / in installments as follows: (specify dates and amounts)].
3. Payment Method. Payment shall be made by [check / bank transfer / money order / cashier's check] to [account/address details].
4. Release of Claims. Upon receipt of full payment, Party A releases and forever discharges Party B from any and all claims, demands, damages, actions, and causes of action arising from or related to the dispute described above.
5. Default. If Party B fails to make any payment as required by this Agreement, Party A shall be entitled to pursue the full original claim amount of $[original amount], less any payments already made, plus court costs, filing fees, and any other costs of collection.
6. Confidentiality. [The parties agree to keep the terms of this Agreement confidential and shall not disclose the terms to any third party except as required by law. / No confidentiality clause.]
7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of [State].
8. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior negotiations, representations, and agreements.
9. Amendments. This Agreement may not be amended or modified except in writing signed by both parties.
Party A (Claimant):
Signature: _________________________ Date: __________
Printed Name: _________________________
Party B (Respondent):
Signature: _________________________ Date: __________
Printed Name: _________________________
How to Make It Enforceable
- Both parties must sign — An unsigned agreement is not enforceable
- Consider a witness or notary — Having the signatures witnessed or notarized adds credibility and may be required in some jurisdictions
- Keep signed copies — Each party should retain a signed copy
- File with the court — If a lawsuit has already been filed, ask the court to enter the agreement as a stipulated judgment. This makes enforcement much easier because you can use the court's enforcement mechanisms.
- Be specific about consequences — Clearly state what happens if the other party does not comply
Need a Customized Document Package?
GetSmallClaims prepares a demand letter, statement of claim, and additional documents customized for your specific case.
Start My Case⚠ Legal Disclaimer: Templates on this site are provided for educational purposes only and do not constitute legal advice. GetSmallClaims is a document preparation service and is not a law firm. Adapt any template to your specific circumstances and consult a licensed attorney in your jurisdiction for specific guidance.