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Date Modified: September 9, 2023

To settle out-of-court means to resolve a legal dispute between two parties without the need for a trial. This can be done through negotiations, mediation, or arbitration. When parties agree to settle out-of-court, they typically reach a mutually agreed-upon settlement that satisfies both sides’ interests. This can involve payment of money or other forms of compensation. Settling out-of-court can be beneficial because it avoids the time, expense, and uncertainty associated with going to trial. It also allows parties to maintain greater control over the outcome of the case and can help preserve relationships that the legal dispute may have damaged.

  • Video Transcript - What Does It Mean to ‘Settle Out-of-Court’?

    Video Transcript - What Does It Mean to ‘Settle Out-of-Court’?

    "0:00 What does it mean to settle out of court?

    0:03 Settling out of court is how probably

    0:05 ninety percent or more of cases are

    0:07 resolved in the United States. It simply

    0:11 means that if you have filed a lawsuit

    0:13 or even if you haven’t filed a lawsuit

    0:15 you always have an opportunity to meet

    0:18 face-to-face and have a sit-down with

    0:20 the person who you are alleging harm to

    0:22 you and trying to resolve. It usually means

    0:25 them paying you a certain amount of

    0:27 money. This is called an out-of-court

    0:29 settlement. [Music]"

When you file a civil action, you have two options: settle out of court or go to trial. Let’s explore what it means to settle out of court with Ehline Law and our personal injury attorneys.

What Does It Mean to ‘Settle Out-of-court’?

The term “settlement” or “out-of-court settlement” refers to an agreement made between the parties to resolve the dispute. The out-of-court settlement does not include the court’s involvement except when ending the proceedings.

A settlement agreement before the trial date stops the parties involved from taking further legal action against each other, and it doesn’t mean admitting guilt.

When both parties agree to a settlement, they mutually end the dispute without needing further legal action. It allows both parties to carry out justice according to their requirements rather than facing the court or a trial, where the jury decides the damages.

Is It Worth It to Settle Out-of-court?

Although a settlement is an excellent alternative to trial, the plaintiff must decide whether it is a great option for them. The benefits and drawbacks of out-of-court settlements depend on the strength of the plaintiff’s case and its likelihood of winning at a trial.

If the plaintiff believes they have a strong case to head to trial, they can demand a larger settlement offer, as winning in the trial can lead to a greater financial outcome. Understanding how the case might play out is essential to determining whether a party should amicably settle.

Benefits of Out-of-Court Settlement

Out-of-court settlements have several benefits that can encourage parties to consider settling without litigation.

  • Speed: Going to trial is a long process that can take years before there is an outcome to a case. An out-of-court settlement is one of the ways parties can resolve disputes without having to wait years. Once a party decides to settle, the process of settlement starts immediately.
  • Cost: Litigation is expensive, especially in complex cases where the court system can take time, which means higher attorney fees. Settling claims outside court means avoiding lengthy trials and fewer attorney costs.
  • Control: In a trial, the jury decides the case’s outcome, how much money gets awarded, and other decisions. On the other hand, a settlement agreement gives both parties a certain level of control over their case. They can mutually decide on the settlement money and other decisions, allowing them to control the case’s outcome.
  • Confidentiality: Going to trial means the case gets registered in public records allowing anyone to access the case information and view the documents. Settlements are often confidential and may not appear in the public record, ensuring the privacy of personal information and other sensitive issues.
  • Relationship: In cases that involve family members or friends, it can ruin relationships between the parties. However, in a settlement, the parties can sit together, put their differences aside, and work together toward a solution.

Drawbacks of Out-of-court Settlement

Although out-of-court settlements have several benefits, some disadvantages may deter certain parties from settling their case.

  • Smaller recovery: If a party has a good chance of winning a trial, a settlement will often result in a smaller recovery, as in a trial, the court can also award punitive damages and other damages that may not be considered during a settlement agreement. If the parties settle, the court cannot impose these damages.
  • No accountability: Parties in emotionally charged cases will not see justice since there is no accountability in an out-of-court settlement.
  • No further action: When an out-of-court settlement takes place, the plaintiff loses their right to pursue legal action. If the plaintiff wants the court to decide the case, then an out-of-court settlement would not be the best option for them.
  • Enforcement: When an out-of-court settlement takes place, it is up to the plaintiff to collect the agreed money. However, recovering compensation on a signed agreement can be challenging, and the plaintiff may have to turn the signed agreement into a court order, which can take some time.
  • Power dynamics: Although this is not so common, there can be one party during an out-of-court settlement that pressurizes the other party into taking an offer. These can happen when large corporations send over their attorneys to injured victims, coercing them into signing an agreement.

An injured party needs to speak to an experienced personal injury attorney about their case to help determine their legal options. An attorney would better guide injured victims on whether they should consider settling a court case or go to trial against other parties based on the evidence available.

How to Settle Outside of Court?

Once the parties determine that settlement is the best option, they must pick one of the dispute resolution methods. Several alternative dispute methods exist to help the parties reach an agreement. Each of them has situations the methods are suitable for, and depending on your chosen method, it can make or break your settlement agreement.


The negotiation process involves the parties going back and forth, trading offers until they reach a settlement or go to court. This process can involve the parties or their attorneys and is an informal way of resolving a dispute. The negotiation process occurs in almost all personal injury cases and involves the following steps.

  • Offers: The negotiation process begins with one party sending an offer to the other and involves terms that may benefit both parties. Opening offers in a personal injury case can be the best for the presenting party but may not be what the receiving party would expect, opening the gates for negotiations.
  • Counteroffer: The party receiving the offer may decide to counter the initial offer if it believes it does not benefit them. Both parties can continue to counteroffer each other to reach a middle ground.
  • Stops and starts: During negotiation, there can be several stops and starts where a party decides to stop a negotiation because they believe the offer is poles apart from what they expect. They can then start a negotiation after evaluating their options and coming back with a clearer picture in their head.
  • Signed agreement: Once both parties reach an agreement, they must enter it into writing and sign it before sending a signed copy to the court. When the court receives a copy of a signed agreement, it will issue a signed order to enforce the agreement.

The negotiation process is an excellent alternative to trial, and if you have a case in a small claims court, it may be the best option to pursue.


Unlike negotiations, facilitation is a process where both parties identify the issues addressed in the court case and work towards solving them. A third party, known as the facilitator, heads the facilitation process, guiding the conversations, identifying the issues, and suggesting solutions.

Facilitation is more of a conversation starter than a resolution and involves the following characteristics:

  • Identifying problems
  • Negotiations
  • Free and informed choice
  • Internal commitment to choice.

Facilitation is a great alternative to trial in cases with several underlying issues or a conflict that is not yet addressed.


Mediation is one of the most common forms of dispute resolution involving a neutral third-party known as the mediator, who oversees the entire dispute resolution process and helps the parties involved to move towards settlement.

It is much more formal than negotiations and gives the dispute resolution process a structure the parties abide by, such as time and location for negotiations. Unlike negotiations, mediation keeps the focus on resolving issues while remaining fair.

It is a voluntary process that includes the following characteristics:

  • Solutions: Some mediators will provide solutions, while others will encourage the parties to sit together and work out the best outcome for each other.
  • Neutral: When a neutral third party enters a dispute resolution process, they do not tilt toward one side more than the other and remain neutral, allowing the parties to speak freely and share their ideas.
  • Formal: A mediator leads the dispute resolution process and sets the parties’ rules.

Mediation is a great option for parties having disputes requiring structure or where parties require guidance when working with each other toward a resolution.


Similar to mediation, where there is a neutral third party, but instead of letting the parties work out a solution, the third party suggests solutions that may work for all the parties involved.

It allows all the parties to preserve their friendship by working together on the solution provided to them, taking off the pressure.

The following are some of the characteristics of conciliation:

  • Statement: All the parties sit together to provide their view on the court case and how they would like to see the case move forward, giving everyone a clear picture of its issues.
  • Suggestions: The conciliator listens to the parties’ issues and provides a suggestion; if the parties like the proposal, they can sign an agreement. However, if they do not agree with the suggestion, the conciliator may try to understand their concerns and provide another suggestion.
  • Restorative: The main goal of this dispute resolution process is to maintain and preserve the relationship between all parties. It helps identify the issues affecting the relationship and aims to solve them to restore the relationship.

Conciliation is a great dispute resolution method for the parties who wish to keep their relationship intact rather than cause fractures or those who require creative solutions. This process is unsuited in cases where both parties are adversaries or uncooperative.

What Happens to the Settlement Amount in an Out-of-Court Settlement Agreement?

You would have to pay your dues first if you’ve gone through the entire settlement process without legal representation and have agreed to a settlement amount. In personal injury cases where an insurance company pays for their insured’s medical treatment or other costs, they have the right to recover the money if their insured makes an out-of-court settlement. If you’ve had an attorney handle the entire settlement process, you would have to pay your attorney’s legal fees and dues before taking the remaining money.

Schedule a Free Consultation with Ehline Law

Out-of-court settlement can be frustrating, especially if you’re going in alone. An insurance company will coerce you into taking a lowball settlement offer. Having an experienced attorney can help handle the entire process and maximize your settlement. If you suffered injuries in an accident that was not your fault, contact us at (833) LETS-SUE for a free consultation, as you may be eligible for compensation.

Michael Ehline is an inactive U.S. Marine and world-famous legal historian. Michael helped draft the Cruise Ship Safety Act and has won some of U.S. history’s largest motorcycle accident settlements. Together with his legal team, Michael and the Ehline Law Firm collect damages on behalf of clients.
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Michael Ehline

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