What is it and when to use it

A settlement agreement is a mutual contract where parties agree to resolve and replace a disputed or unclear obligation.
It replaces the previous relationship with a new arrangement.

Common use cases:

• unclear or disputed payment

• partial cancellation of debt

• settlement after a complaint

• ending cooperation with mutual release

• resolution between former partners or clients

Legal framework

Regulated by Sections 1903–1907 of the Czech Civil Code.

Key principles:

• replaces previous obligation

• binding for both parties

• no further claims unless otherwise stated

• fraud or concealment voids the settlement

Key elements

• Parties and background of dispute

• Clear new agreement

• Statement replacing previous claims

• Waiver of further claims

• Signatures and date

Common mistakes

• Vague wording

• Not stating that the previous obligation is replaced

• No mutual waiver

• Tax implications ignored

• Treated as simple promise or forgiveness

Recommendations

• Be explicit: “this agreement replaces all previous obligations”

• Include mutual release clause

• Use in all cases of dispute resolution without court

• Seek legal advice if larger stakes involved

Practice tip

It’s cheaper than litigation, faster than arbitration, and legally enforceable when done right.

Settlement template – available for a symbolic fee

I offer a Czech-English template for settlement agreements in various situations – debt, delivery, cooperation, etc.

Contact me via e-mail or form – peace of mind in writing.

FINAL THOUGHTS – WHAT NOW?

A settlement agreement isn’t just a formality – it’s a legal shield, if drafted properly. And a trap, if not.

Do you want to be sure your contract will hold up even in a crisis? Get in touch and let’s schedule a meeting. I am a specialist on contract law – more information here.