What Is the Difference between Agreement and Settlement

As an experienced copy editor with a strong background in SEO, I am often asked to clarify the difference between certain legal terms. Recently, a client approached me with questions about the differences between agreement and settlement in legal terms. In this article, I will break down the definitions of these two terms and explain how they differ from one another in the legal world.


An agreement is a legally binding contract between two or more parties. This contract can be in the form of a written document or a verbal agreement. An agreement outlines the terms and conditions of a particular transaction or relationship between the parties involved. This can include everything from the price of goods or services to the methods of delivery or payment.

Agreements can be informal or formal, depending on the parties involved and the nature of the transaction. For example, if two friends agree to swap goods or services, that would be considered an informal agreement. However, if two companies agree to enter into a multi-million dollar business deal, that would be a formal agreement.


A settlement is a legal agreement between two or more parties that resolves a dispute or lawsuit. This agreement is often reached after a period of negotiation or mediation. Settlements can be reached in any type of legal case, including personal injury, employment disputes, and contract disputes.

Settlements typically involve some form of compensation or agreement to modify the behavior of one or more parties involved in the dispute. For example, in an employment dispute, a settlement may involve a monetary payment to the employee and an agreement by the employer to change its policies or procedures.

Differences between Agreement and Settlement:

The key difference between an agreement and a settlement is that an agreement is focused on establishing the terms of a particular transaction or relationship, while a settlement is focused on resolving a dispute or lawsuit. Agreements are typically reached before any dispute arises, while settlements are reached in response to a dispute.

Additionally, agreements can be informal or formal, while settlements are always formal and legal in nature. Settlements must be reviewed and approved by a judge in a court of law, while agreements do not necessarily require legal review or approval.


In summary, the main difference between agreements and settlements is their purpose. Agreements establish the terms of a particular transaction or relationship between parties, while settlements resolve disputes between parties. As a professional, it is important to have a clear understanding of legal terms like agreement and settlement to accurately and effectively communicate this information to readers.

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