“A Bad settlement is always better than a good trial”.
Though I would not agree with this phrase entirely—a settlement is not supposed to be good or bad, but acceptable for a party to a Small Claims Court proceedings – it’s a good saying to remember and is often repeated in small claims court rooms. The phrase highlights that a settlement is an important objective for by both parties to strive for and consider in the Small Claims Court matter. What benefits can both parties obtain if a Small Claims lawsuit is settled without a trial? Broadly, there are four.
- Save money on legal expenses.
- Avoid a trial, which is usually a stressful and time consuming experience.
- Plan your finances. A settlement is a good way to eliminate risks which are inevitably associated with a Small Claims trial procedure.
- Complete the matter without assuming liability. A settlement does not mean that the paying party admits liability or considers itself in the wrong. A settlement is usually done on a without prejudice basis and for the sole purpose of avoiding further litigation. This condition may be specifically noted in a settlement agreement.
Despite the good reasons outlined above, it is a common concern that one of the parties may not follow conditions of the settlement. Small Claims Court practices are quite elaborate to ensure that a settlement, if it is reached at any stage of the procedure, is enforceable. In all cases, a settlement should be put in the form of written agreement which, in precise language, describes what each party must do. For example, if the defendant agrees to pay a certain amount, an agreement must include the amount and timing of payments If the parties agree that the amount of settlement may be paid in instalments, the agreement should include the amount of each instalment and the date when it must be paid.
To discourage a defendant from non-payment, a Small Claims Court settlement agreement should include a provision that if a party is in default of any payment set by the agreement, the other party is entitled to obtain a judgment against the non-payer for the entire amount of the initial claim. It means that the judgment may be issued without a trial based on the evaluation of the damages made by the court, in the absence of the defaulting party.