{"id":970,"date":"2026-09-24T16:43:39","date_gmt":"2026-09-24T12:43:39","guid":{"rendered":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/?page_id=970"},"modified":"2026-09-24T16:43:39","modified_gmt":"2026-09-24T12:43:39","slug":"draft-settlement-agreement","status":"publish","type":"page","link":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/contract-drafting\/draft-settlement-agreement\/","title":{"rendered":"Draft Settlement Agreement"},"content":{"rendered":"<h1>Draft Settlement Agreement in the UAE<\/h1>\n<p>A settlement agreement records the terms on which parties resolve an existing dispute or potential claim without continuing the disagreement on its original basis. It may involve payment of an agreed amount, withdrawal of claims, performance of outstanding obligations, return of property, termination of a contract, or another legally permissible compromise.<\/p>\n<p>Settlement agreements are commonly used in commercial disputes, payment claims, contractual disagreements, shareholder conflicts, service disputes, and other civil matters where the parties prefer to reach an agreed resolution.<\/p>\n<p>The wording is important because a settlement may permanently affect rights that one or both parties could otherwise have pursued.<\/p>\n<p>Abdulrahman Alshaali Advocates &amp; Legal Consultants assists businesses and individuals with preparing and reviewing settlement agreements under UAE law.<\/p>\n<h2>Settlement Agreements Under UAE Law<\/h2>\n<p>Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law contains specific provisions governing settlement.<\/p>\n<p>Article 672 requires a person concluding a settlement to have the legal capacity to dispose, for consideration, of the rights covered by the agreement. Where the settlement involves a waiver of rights without consideration, the capacity required for a donation becomes relevant.<\/p>\n<p>Article 674 establishes an important limitation: settlement is not permissible in matters concerning personal status or public order. However, settlement may be possible in relation to financial rights arising from personal status matters or from the commission of a crime, subject to applicable legislation.<\/p>\n<p>Article 676 requires the subject matter of the settlement and the agreed consideration to be known and legally capable of being exchanged.<\/p>\n<p>These requirements mean that a settlement should identify precisely what dispute is being resolved and what each party will provide in return.<\/p>\n<p>A settlement should not be drafted as a vague statement that \u201call issues are resolved\u201d without identifying the legal and commercial consequences the parties intend.<\/p>\n<h2>What Does a Settlement Agreement Actually Do?<\/h2>\n<p>A settlement replaces the disputed position with an agreed resolution.<\/p>\n<p>For example, one company may claim AED 500,000 for unpaid invoices while the other disputes part of the amount.<\/p>\n<p>The parties may agree that AED 350,000 will be paid in full and final settlement of the identified invoice dispute.<\/p>\n<p>The agreement should then establish:<\/p>\n<ul>\n<li>The amount to be paid.<\/li>\n<li>The payment deadline.<\/li>\n<li>Whether payment will be made in instalments.<\/li>\n<li>Which claims are being resolved.<\/li>\n<li>What happens after payment.<\/li>\n<li>Whether any proceedings will be withdrawn.<\/li>\n<li>Which obligations continue after settlement.<\/li>\n<\/ul>\n<p>The legal effect can be substantial.<\/p>\n<p>Article 680 of the Civil Transactions Law provides that settlement results in the transfer of the settling party&#8217;s right to the agreed consideration and extinction of the right that was the subject of the dispute, with the parties and their heirs thereafter unable to revoke the settlement.<\/p>\n<p>The scope of the settled dispute should therefore be defined carefully.<\/p>\n<h2>Settlement of an Admitted, Denied, or Disputed Claim<\/h2>\n<p>A settlement does not require the party against whom the claim is made to admit liability.<\/p>\n<p>Article 677 of the Civil Transactions Law provides that a settlement concerning rights may be valid whether the defendant admits the claim, denies it, or remains silent without admitting or denying it.<\/p>\n<p>This makes settlement useful where the parties want to resolve a dispute without determining who was legally correct.<\/p>\n<p>For example, a contractor may claim that additional work was properly authorised.<\/p>\n<p>The customer may deny any obligation to pay for it.<\/p>\n<p>The parties may nevertheless agree on a settlement amount to bring the disagreement to an end.<\/p>\n<p>The agreement can expressly state that settlement does not constitute an admission of liability where that reflects the parties&#8217; intention.<\/p>\n<p>This distinction can be important where the parties wish to resolve the matter commercially without accepting the allegations made against them.<\/p>\n<h2>Defining the Dispute Being Settled<\/h2>\n<p>The agreement should identify the dispute clearly.<\/p>\n<p>This may involve:<\/p>\n<ul>\n<li>A specific contract.<\/li>\n<li>Particular invoices.<\/li>\n<li>An identified project.<\/li>\n<li>Specified court proceedings.<\/li>\n<li>A claim concerning defective work.<\/li>\n<li>A shareholder disagreement.<\/li>\n<li>An employment-related financial claim where settlement is legally permissible.<\/li>\n<li>Another identifiable civil or commercial dispute.<\/li>\n<\/ul>\n<p>For example, two companies may have several contracts with each other.<\/p>\n<p>If the settlement concerns only unpaid invoices under one project, the agreement should not unintentionally release unrelated claims arising under other contracts.<\/p>\n<p>The parties should therefore determine whether the settlement is:<\/p>\n<ul>\n<li>Limited to one identified dispute.<\/li>\n<li>Limited to claims arising during a particular period.<\/li>\n<li>Intended to resolve the entire commercial relationship.<\/li>\n<li>Intended to release all claims between the parties to the extent legally permissible.<\/li>\n<\/ul>\n<p>Precise drafting helps prevent a later argument about whether a particular claim was included in the settlement.<\/p>\n<h2>Full and Final Settlement Clauses<\/h2>\n<p>Settlement agreements often contain wording stating that the agreed terms constitute a full and final settlement.<\/p>\n<p>The effect of such wording depends on the claims identified and the agreement as a whole.<\/p>\n<p>The clause should explain what is being settled rather than relying on the phrase alone.<\/p>\n<p>For example, an agreement may provide that payment of AED 250,000 constitutes full and final settlement of all claims arising from a specified supply contract up to a particular date.<\/p>\n<p>That is more precise than stating simply that the payment settles \u201call matters between the parties.\u201d<\/p>\n<p>The parties should consider whether they genuinely intend to release unknown or future claims.<\/p>\n<p>A broad release may affect rights that were not actively discussed during negotiations.<\/p>\n<p>The wording should therefore correspond to the actual compromise reached.<\/p>\n<h2>Settlement Amount and Payment Terms<\/h2>\n<p>Where settlement involves payment, the agreement should identify the financial terms precisely.<\/p>\n<p>These may include:<\/p>\n<ul>\n<li>Total settlement amount.<\/li>\n<li>Currency.<\/li>\n<li>Payment date.<\/li>\n<li>Instalment schedule.<\/li>\n<li>Bank account.<\/li>\n<li>Responsibility for transfer charges.<\/li>\n<li>Treatment of taxes where relevant.<\/li>\n<li>Consequences of late payment.<\/li>\n<\/ul>\n<p>For example, the parties may agree that AED 600,000 will be paid in six monthly instalments of AED 100,000.<\/p>\n<p>The agreement should identify the due date of each instalment.<\/p>\n<p>It should also determine whether the release of claims takes effect:<\/p>\n<ul>\n<li>When the agreement is signed.<\/li>\n<li>When the first payment is made.<\/li>\n<li>Only after the settlement amount is paid in full.<\/li>\n<li>According to another agreed mechanism.<\/li>\n<\/ul>\n<p>This point can be critical.<\/p>\n<p>If claims are released immediately but the payment is later not completed, the claimant may face a different position than if the release becomes effective only after full payment.<\/p>\n<h2>Settlements Involving Instalment Payments<\/h2>\n<p>An instalment settlement should address the possibility that one payment is missed.<\/p>\n<p>The agreement may establish a procedure concerning default.<\/p>\n<p>For example, the parties may agree that if an instalment is not paid by the specified date, the paying party receives written notice and a short period to remedy the default.<\/p>\n<p>The agreement should then explain what happens if payment remains outstanding.<\/p>\n<p>Potential contractual consequences may include acceleration of remaining settlement instalments or another legally permissible remedy.<\/p>\n<p>The drafting should avoid contradictory provisions.<\/p>\n<p>For example, the agreement should not simultaneously state that the original claim was extinguished immediately and that the original claim automatically revives without explaining the intended legal mechanism.<\/p>\n<p>The parties should determine the legal consequence of default before signing.<\/p>\n<p>Where the settlement involves significant deferred payments, additional security may also require consideration.<\/p>\n<h2>Settlement Through Performance Instead of Payment<\/h2>\n<p>Not every settlement involves money.<\/p>\n<p>A dispute may be resolved through performance of an outstanding obligation.<\/p>\n<p>For example:<\/p>\n<ul>\n<li>A contractor may complete specified remedial work.<\/li>\n<li>A supplier may replace defective products.<\/li>\n<li>A company may return equipment.<\/li>\n<li>A party may transfer agreed property.<\/li>\n<li>Services may be completed within a revised timetable.<\/li>\n<\/ul>\n<p>The agreement should define the required performance objectively.<\/p>\n<p>If a contractor agrees to correct defective work, the settlement should identify:<\/p>\n<ul>\n<li>The remedial work.<\/li>\n<li>Required specifications.<\/li>\n<li>Completion date.<\/li>\n<li>Inspection procedure.<\/li>\n<li>Responsibility for costs.<\/li>\n<li>Consequences of incomplete performance.<\/li>\n<\/ul>\n<p>A general promise to \u201cfix all problems\u201d may create another dispute about whether the settlement itself was performed.<\/p>\n<p>The same drafting principles that apply to the original contract should therefore be used when defining settlement obligations.<\/p>\n<h2>Partial Settlement of a Dispute<\/h2>\n<p>The parties do not need to resolve every issue at the same time.<\/p>\n<p>A settlement may resolve only part of a dispute.<\/p>\n<p>For example, the parties may agree on the principal debt while continuing to dispute another issue.<\/p>\n<p>Article 678 of the Civil Transactions Law provides that where a person settles for part of a claim or for part of what they allege is owed, they are deemed to waive the right to claim the remainder.<\/p>\n<p>This makes careful drafting particularly important where the parties intend to preserve any unresolved claims.<\/p>\n<p>The agreement should identify:<\/p>\n<ul>\n<li>Which issues are settled.<\/li>\n<li>Which issues remain disputed.<\/li>\n<li>Which rights are expressly preserved.<\/li>\n<\/ul>\n<p>Where a case is already before a court, the procedural consequences of a partial settlement should also be addressed appropriately.<\/p>\n<p>The parties should not rely on an informal understanding that a particular claim was intended to remain open.<\/p>\n<h2>Waiver and Release of Claims<\/h2>\n<p>A settlement commonly includes a release of claims.<\/p>\n<p>The release should identify who gives it and what rights it covers.<\/p>\n<p>The parties may need to determine whether the release applies to:<\/p>\n<ul>\n<li>Contractual claims.<\/li>\n<li>Payment claims.<\/li>\n<li>Claims arising from identified events.<\/li>\n<li>Related companies.<\/li>\n<li>Employees or representatives.<\/li>\n<li>Existing proceedings.<\/li>\n<\/ul>\n<p>Broad releases should be used carefully.<\/p>\n<p>For example, releasing claims against \u201call affiliates, officers, employees, agents, and related persons\u201d can affect parties who were not directly involved in the dispute.<\/p>\n<p>The legal effect of any release depends on the rights involved and applicable law.<\/p>\n<p>The agreement should not attempt to waive rights that cannot legally be compromised.<\/p>\n<p>Where the parties intend a mutual release, the obligations should apply clearly to both sides.<\/p>\n<h2>No Admission of Liability<\/h2>\n<p>A settlement may be reached for commercial reasons without either party accepting the other party&#8217;s allegations.<\/p>\n<p>The agreement may therefore include a no-admission provision.<\/p>\n<p>For example, a company may agree to make a payment because continued litigation would be costly and disruptive, while continuing to deny that it breached the underlying contract.<\/p>\n<p>The agreement can state that the settlement does not constitute an admission of liability or wrongdoing.<\/p>\n<p>This provision should be distinguished from the actual settlement obligations.<\/p>\n<p>A party cannot use a no-admission clause to deny the obligation to make the payment or perform the compromise it has expressly agreed.<\/p>\n<p>The purpose is to clarify the parties&#8217; position regarding the underlying allegations, not to make the settlement itself optional.<\/p>\n<h2>Confidentiality of Settlement Terms<\/h2>\n<p>The parties may wish to keep the settlement confidential.<\/p>\n<p>A confidentiality provision may address:<\/p>\n<ul>\n<li>The existence of the settlement.<\/li>\n<li>Settlement amount.<\/li>\n<li>Negotiations.<\/li>\n<li>Supporting documents.<\/li>\n<li>Commercial information disclosed during the dispute.<\/li>\n<\/ul>\n<p>However, confidentiality should include appropriate exceptions.<\/p>\n<p>Disclosure may be required to:<\/p>\n<ul>\n<li>Lawyers.<\/li>\n<li>Accountants.<\/li>\n<li>Auditors.<\/li>\n<li>Insurers.<\/li>\n<li>Banks.<\/li>\n<li>Regulators.<\/li>\n<li>Courts.<\/li>\n<li>Government authorities.<\/li>\n<li>Other persons where legally required.<\/li>\n<\/ul>\n<p>For example, a company may need to disclose a material settlement to its auditors even if the parties have agreed not to publicise the terms.<\/p>\n<p>The agreement should therefore permit necessary disclosures while restricting unnecessary publication.<\/p>\n<p>Where extensive confidential information is involved, a <strong>Draft Confidentiality Agreement<\/strong> may also require consideration.<\/p>\n<h2>Non-Disparagement Provisions<\/h2>\n<p>Parties sometimes seek provisions restricting public statements concerning the dispute or settlement.<\/p>\n<p>These clauses should be defined carefully.<\/p>\n<p>A broad statement that neither party may ever make any negative comment may create uncertainty about truthful statements required in legal, regulatory, or professional contexts.<\/p>\n<p>The agreement may instead address identified forms of public communication concerning the dispute.<\/p>\n<p>Exceptions should be considered where disclosure is legally required.<\/p>\n<p>The parties should also determine whether the provision applies only to the companies themselves or whether obligations concerning identified representatives are intended.<\/p>\n<p>A settlement should not impose obligations on persons who are not legally bound by the agreement without an appropriate contractual basis.<\/p>\n<h2>Returning Property and Documents<\/h2>\n<p>A dispute may involve property or records belonging to one of the parties.<\/p>\n<p>The settlement can establish how they will be returned.<\/p>\n<p>This may include:<\/p>\n<ul>\n<li>Equipment.<\/li>\n<li>Company records.<\/li>\n<li>Access cards.<\/li>\n<li>Confidential documents.<\/li>\n<li>Technical materials.<\/li>\n<li>Electronic files.<\/li>\n<li>Customer information.<\/li>\n<\/ul>\n<p>For example, a service-provider dispute may end with the provider still holding the customer&#8217;s equipment and project files.<\/p>\n<p>The agreement should establish:<\/p>\n<ul>\n<li>What must be returned.<\/li>\n<li>In what condition.<\/li>\n<li>By which date.<\/li>\n<li>Who pays delivery costs.<\/li>\n<li>Whether copies may be retained.<\/li>\n<\/ul>\n<p>Where legal or regulatory record retention is required, appropriate exceptions may be necessary.<\/p>\n<p>The return process should be sufficiently specific to avoid further disagreements after the principal financial settlement has been completed.<\/p>\n<h2>Settlement of Existing Court Proceedings<\/h2>\n<p>Parties may settle after court proceedings have already begun.<\/p>\n<p>In that situation, the settlement should address what will happen to the case.<\/p>\n<p>Depending on the procedure and the nature of the agreement, the parties may need to take formal steps before the competent court.<\/p>\n<p>The agreement may identify responsibilities for:<\/p>\n<ul>\n<li>Filing relevant settlement documents.<\/li>\n<li>Requesting termination of proceedings.<\/li>\n<li>Addressing court fees.<\/li>\n<li>Dealing with interim measures.<\/li>\n<li>Taking steps concerning enforcement proceedings.<\/li>\n<li>Completing any required judicial approval procedure.<\/li>\n<\/ul>\n<p>The parties should not assume that signing a private settlement automatically closes an existing court case.<\/p>\n<p>The necessary procedural steps should be completed before the parties treat the litigation as concluded.<\/p>\n<h2>Settlement Through Mediation or Conciliation<\/h2>\n<p>Federal Decree-Law No. 40 of 2023 on Mediation and Conciliation in Civil and Commercial Disputes provides a specific framework for settlement through mediation and conciliation.<\/p>\n<p>The law defines a settlement agreement as a document prepared through the relevant mediation or conciliation process, signed by the parties, and setting out the settlement reached in whole or in part.<\/p>\n<p>Article 23 addresses ratification where the parties reach settlement through mediation.<\/p>\n<p>The mediator submits the report and signed settlement agreement for the relevant approval procedure.<\/p>\n<p>Article 25 provides that a ratified settlement agreement is binding and irrevocable between the parties and has the same probative force as court judgments.<\/p>\n<p>This creates an important distinction between a purely private settlement contract and a settlement concluded and ratified through the statutory mediation or conciliation framework.<\/p>\n<p>The parties should determine which process is appropriate to their dispute.<\/p>\n<h2>When a Settlement Agreement Can Become Enforceable Through the Mediation Framework<\/h2>\n<p>Where a civil or commercial dispute is resolved through the statutory mediation procedure, judicial ratification can give the settlement significant enforcement consequences.<\/p>\n<p>Federal Decree-Law No. 40 of 2023 provides a mechanism through which the settlement reached in mediation is submitted for ratification.<\/p>\n<p>Once ratified in accordance with the legislation, the settlement has the legal force provided by the law and the same probative effect as a court judgment.<\/p>\n<p>The parties should therefore ensure that the document submitted for ratification reflects the agreement accurately.<\/p>\n<p>For example, an instalment schedule should identify each payment date rather than referring generally to payment \u201cover the coming months.\u201d<\/p>\n<p>An unclear settlement can create enforcement difficulties even where the underlying dispute has already been resolved.<\/p>\n<p>The settlement should be capable of implementation without requiring the parties to renegotiate essential terms.<\/p>\n<h2>Authority to Enter into a Settlement<\/h2>\n<p>A settlement may involve surrendering or compromising valuable legal rights.<\/p>\n<p>The person signing must therefore have appropriate authority.<\/p>\n<p>For individuals, this involves legal capacity to dispose of the relevant rights.<\/p>\n<p>For companies, the agreement should be signed by a representative authorised to settle the dispute.<\/p>\n<p>Article 672 of the Civil Transactions Law expressly addresses capacity in relation to settlement.<\/p>\n<p>For a corporate party, the required authority may depend on:<\/p>\n<ul>\n<li>Constitutional documents.<\/li>\n<li>Management powers.<\/li>\n<li>Corporate resolutions.<\/li>\n<li>Power of attorney.<\/li>\n<li>The value and nature of the claim.<\/li>\n<\/ul>\n<p>For example, a company representative may have authority to negotiate but not authority to waive a multimillion-dirham claim.<\/p>\n<p>Where authority is uncertain, it should be confirmed before execution.<\/p>\n<p>A later challenge concerning the signatory&#8217;s authority can undermine the purpose of achieving finality through settlement.<\/p>\n<h2>Settlement Involving Third-Party Rights<\/h2>\n<p>A dispute may involve rights belonging to someone who is not a party to the settlement.<\/p>\n<p>The agreement should not assume that two parties can dispose of another person&#8217;s rights.<\/p>\n<p>Article 676 of the Civil Transactions Law provides that where settlement consideration consists of a specific thing or usufruct owned by a third party, effectiveness depends on that third party&#8217;s ratification.<\/p>\n<p>Third-party issues can also arise where:<\/p>\n<ul>\n<li>A guarantor is involved.<\/li>\n<li>An insurer has relevant rights.<\/li>\n<li>Several creditors exist.<\/li>\n<li>Several companies are parties to the original transaction.<\/li>\n<li>Property belongs to another entity.<\/li>\n<\/ul>\n<p>For example, two companies may settle a dispute involving equipment owned by a leasing company.<\/p>\n<p>Their agreement cannot simply transfer ownership of that equipment without addressing the rights of the actual owner.<\/p>\n<p>All necessary parties should be identified before the settlement is finalised.<\/p>\n<h2>Guarantees and Security for Settlement Payments<\/h2>\n<p>Where the settlement amount will be paid over time, the receiving party may seek security.<\/p>\n<p>Depending on the transaction, this may involve:<\/p>\n<ul>\n<li>A corporate guarantee.<\/li>\n<li>A personal guarantee where legally appropriate.<\/li>\n<li>Security over assets.<\/li>\n<li>Another recognised security arrangement.<\/li>\n<\/ul>\n<p>The security should be documented properly.<\/p>\n<p>For example, a creditor accepting a substantial reduction in the amount claimed may agree to instalments only if another group company guarantees payment.<\/p>\n<p>The agreement should identify whether the guarantee covers:<\/p>\n<ul>\n<li>All instalments.<\/li>\n<li>Default amounts.<\/li>\n<li>Agreed costs.<\/li>\n<li>Another defined obligation.<\/li>\n<\/ul>\n<p>Security arrangements may be subject to separate legal formalities.<\/p>\n<p>A general sentence stating that a payment is \u201cguaranteed\u201d may be insufficient to create the intended security.<\/p>\n<h2>Settlement and Existing Guarantees<\/h2>\n<p>The parties should consider whether settling the principal debt affects existing guarantees or security.<\/p>\n<p>For example, a creditor may hold a guarantee supporting an original debt of AED 1 million.<\/p>\n<p>The creditor and debtor then settle for AED 700,000.<\/p>\n<p>The parties should determine how the settlement affects the guarantee.<\/p>\n<p>This issue can be particularly important where the guarantor is not a party to the settlement.<\/p>\n<p>The agreement should not inadvertently release security that the creditor intended to preserve.<\/p>\n<p>Similarly, a creditor should not assume that every existing guarantee automatically continues after the original obligation is materially changed.<\/p>\n<p>The relevant documents and applicable law should be reviewed together.<\/p>\n<h2>Legal Costs and Settlement Expenses<\/h2>\n<p>The agreement should address responsibility for legal and other dispute-related costs where necessary.<\/p>\n<p>Possible approaches include:<\/p>\n<ul>\n<li>Each party bearing its own costs.<\/li>\n<li>One party paying an agreed amount toward the other&#8217;s costs.<\/li>\n<li>Costs being included in the settlement sum.<\/li>\n<li>Separate treatment of court or expert fees.<\/li>\n<\/ul>\n<p>For example, the claimant may agree to accept AED 400,000 plus AED 20,000 toward legal costs.<\/p>\n<p>If the wording instead states that AED 400,000 resolves \u201call amounts,\u201d disagreement may later arise over whether costs were included.<\/p>\n<p>The agreement should identify the intended treatment clearly.<\/p>\n<p>Where proceedings are already before a court, the parties should also consider any procedural rules governing judicial fees or costs.<\/p>\n<p>Settlement through statutory mediation may involve separate provisions concerning mediation costs and potential fee refunds.<\/p>\n<h2>Tax and Accounting Treatment<\/h2>\n<p>A settlement payment can have tax and accounting consequences.<\/p>\n<p>The agreement should avoid making assumptions about those consequences unless they have been properly assessed.<\/p>\n<p>For example, part of a settlement may represent unpaid contractual consideration while another part relates to compensation for a disputed claim.<\/p>\n<p>The parties may need professional accounting or tax advice concerning the appropriate treatment.<\/p>\n<p>The agreement can identify the contractual nature of the payment but should not attempt to guarantee a particular tax outcome without an appropriate basis.<\/p>\n<p>Where VAT or another tax issue may apply, the parties should establish responsibility for issuing required documentation.<\/p>\n<p>The financial wording should correspond to the transaction being settled.<\/p>\n<h2>Electronic Execution of Settlement Agreements<\/h2>\n<p>Settlement agreements may sometimes be executed electronically, subject to the nature of the agreement and any applicable formal requirements.<\/p>\n<p>Federal Decree-Law No. 46 of 2021 on Electronic Transactions and Trust Services provides the UAE framework concerning electronic documents and signatures.<\/p>\n<p>However, the parties should consider whether the particular settlement requires:<\/p>\n<ul>\n<li>Court ratification.<\/li>\n<li>Notarisation.<\/li>\n<li>Authentication.<\/li>\n<li>Registration.<\/li>\n<li>Another formal procedure.<\/li>\n<\/ul>\n<p>For example, an electronically signed private commercial settlement may be treated differently from an agreement that must be submitted through a particular judicial process.<\/p>\n<p>The execution method should therefore be selected according to the intended legal use of the settlement.<\/p>\n<h2>What Happens If the Settlement Is Not Performed?<\/h2>\n<p>A settlement should anticipate the possibility of non-performance.<\/p>\n<p>For example, a debtor may agree to pay five instalments but stop after the second payment.<\/p>\n<p>The agreement should establish the contractual consequences of that default.<\/p>\n<p>Relevant matters may include:<\/p>\n<ul>\n<li>Notice of default.<\/li>\n<li>Remedy period.<\/li>\n<li>Acceleration of unpaid instalments.<\/li>\n<li>Enforcement of the settlement obligation.<\/li>\n<li>Effect on any release.<\/li>\n<li>Rights under existing security.<\/li>\n<\/ul>\n<p>The appropriate mechanism depends on how the settlement was structured.<\/p>\n<p>Where the agreement has been ratified through the mediation or conciliation framework, statutory enforcement mechanisms may apply.<\/p>\n<p>A private settlement may require different steps.<\/p>\n<p>The agreement should avoid leaving the parties uncertain about whether they must return to the original dispute or enforce the settlement itself.<\/p>\n<h2>A Practical Example: Settlement with an Unclear Release<\/h2>\n<p>Consider a supplier claiming AED 800,000 from a customer for several unpaid invoices.<\/p>\n<p>The customer disputes AED 300,000 because of alleged defects.<\/p>\n<p>The parties negotiate and agree that the customer will pay AED 600,000.<\/p>\n<p>Their settlement agreement states only that this amount is accepted \u201cin settlement of the matter.\u201d<\/p>\n<p>Six months later, the supplier identifies another unpaid invoice under a separate project and demands payment.<\/p>\n<p>The customer argues that the earlier agreement released every claim between the companies.<\/p>\n<p>The supplier argues that only the disputed invoices were settled.<\/p>\n<p>A carefully prepared settlement agreement could have identified the invoice numbers, contract, project, and claims covered by the release.<\/p>\n<p>It could also have expressly preserved unrelated claims.<\/p>\n<p>The example demonstrates why the scope of settlement should be stated precisely rather than left to a general phrase.<\/p>\n<h2>Documents Required to Draft a Settlement Agreement<\/h2>\n<p>The required documents depend on the dispute.<\/p>\n<p>Relevant materials may include:<\/p>\n<ul>\n<li>The underlying contract.<\/li>\n<li>Relevant invoices.<\/li>\n<li>Correspondence.<\/li>\n<li>Notices of breach.<\/li>\n<li>Court or arbitration documents.<\/li>\n<li>Expert reports.<\/li>\n<li>Payment records.<\/li>\n<li>Existing guarantees or security.<\/li>\n<li>Corporate authority documents.<\/li>\n<li>Previous settlement proposals.<\/li>\n<li>Mediation documents.<\/li>\n<li>Details of agreed settlement terms.<\/li>\n<\/ul>\n<p>The drafting process should identify the actual dispute and the rights the parties intend to compromise.<\/p>\n<p>Where proceedings are already underway, the current procedural position should also be reviewed.<\/p>\n<p>The settlement agreement should correspond with the evidence and legal arrangements already affecting the dispute.<\/p>\n<h2>Settlement Agreement Drafting Assistance from Abdulrahman Alshaali Advocates &amp; Legal Consultants<\/h2>\n<p>A settlement agreement should resolve the dispute clearly without creating new uncertainty about payment, releases, continuing obligations, or enforcement.<\/p>\n<p>Abdulrahman Alshaali Advocates &amp; Legal Consultants assists businesses and individuals with preparing and reviewing settlement agreements under UAE law.<\/p>\n<p>Our services may include defining the scope of settled claims, developing payment arrangements, drafting releases, reviewing security, addressing confidentiality, and considering the appropriate procedural steps where litigation, mediation, or conciliation is already underway.<\/p>\n<p>Where the settlement modifies obligations under an existing business relationship, a <strong>Draft Agreement Between Two Companies<\/strong> or other transaction-specific documentation may also require amendment.<\/p>\n<p>Clients seeking assistance with wider contractual matters can explore our <strong>contract drafting<\/strong> services.<\/p>\n<h2>Explore Our Contract Drafting Services<\/h2>\n<p>Our contract drafting services cover dispute resolution, commercial, corporate, investment, employment, property, financing, services, confidentiality, and personal agreements.<\/p>\n<h3>General Contract Preparation<\/h3>\n<p><strong>contract drafting:<\/strong> Explore legal assistance with preparing, reviewing, and negotiating agreements under UAE law.<\/p>\n<p><strong>contract writing:<\/strong> Develop contractual language that accurately expresses the parties&#8217; agreed rights and obligations.<\/p>\n<p><strong>draft contract:<\/strong> Prepare an agreement from initial instructions through to the final contractual document.<\/p>\n<p><strong>contract drafting lawyer:<\/strong> Obtain legal assistance with contractual preparation, review, and negotiation.<\/p>\n<p><strong>draft contract between two parties:<\/strong> Establish contractual responsibilities and obligations between two parties.<\/p>\n<h3>Employment and Workplace Agreements<\/h3>\n<p><strong>draft employment contract:<\/strong> Prepare employment contracts reflecting applicable UAE labour requirements.<\/p>\n<p><strong>Draft Employment Agreement:<\/strong> Document employment-related arrangements and supplementary contractual conditions.<\/p>\n<p><strong>Non-Compete Agreement Draft:<\/strong> Address restrictions on competitive activity within applicable legal limits.<\/p>\n<h3>Property and Rental Agreements<\/h3>\n<p><strong>draft tenancy agreement:<\/strong> Prepare residential tenancy agreements addressing landlord and tenant responsibilities.<\/p>\n<p><strong>draft lease agreement:<\/strong> Establish commercial property leasing arrangements and relevant operational obligations.<\/p>\n<p><strong>draft rental agreement:<\/strong> Document rental payments, security deposits, property handover, and related financial conditions.<\/p>\n<h3>Corporate and Investment Agreements<\/h3>\n<p><strong>draft partnership agreement:<\/strong> Establish partners&#8217; contributions, management responsibilities, and financial arrangements.<\/p>\n<p><strong>draft operating agreement:<\/strong> Prepare internal management documentation appropriate to a company&#8217;s legal structure.<\/p>\n<p><strong>Draft Shareholders Agreement:<\/strong> Define shareholder rights, governance arrangements, ownership transfers, and exit provisions.<\/p>\n<p><strong>Draft Investment Agreement:<\/strong> Document investment commitments, funding conditions, and investor rights.<\/p>\n<p><strong>Draft Joint Venture Agreement:<\/strong> Establish the contributions and responsibilities of businesses undertaking a collaborative project.<\/p>\n<h3>Commercial and Financial Agreements<\/h3>\n<p><strong>draft business contract:<\/strong> Prepare agreements governing commercial transactions and ongoing business relationships.<\/p>\n<p><strong>Draft Sales Agreement:<\/strong> Establish contractual terms concerning the sale of goods or other assets.<\/p>\n<p><strong>Draft Supply Agreement:<\/strong> Define product specifications, quantities, delivery arrangements, and payment obligations.<\/p>\n<p><strong>draft loan agreement:<\/strong> Document financing arrangements, repayment conditions, and relevant security provisions.<\/p>\n<p><strong>Franchise Agreement Draft:<\/strong> Establish contractual provisions governing franchise operations, fees, and intellectual property.<\/p>\n<p><strong>Draft Agreement Between Two Companies:<\/strong> Document commercial obligations and responsibilities between separate corporate entities.<\/p>\n<h3>Services and Confidentiality Agreements<\/h3>\n<p><strong>draft consulting services agreement:<\/strong> Establish consultancy deliverables, professional responsibilities, and agreed fees.<\/p>\n<p><strong>Draft Service Agreement:<\/strong> Define service requirements, performance standards, and payment arrangements.<\/p>\n<p><strong>draft nda agreement:<\/strong> Identify confidential information and establish restrictions on its unauthorised disclosure or use.<\/p>\n<p><strong>Draft Confidentiality Agreement:<\/strong> Prepare confidentiality obligations for commercial negotiations and professional relationships.<\/p>\n<h3>Personal Agreements<\/h3>\n<p><strong>Prenuptial Agreement Draft:<\/strong> Document legally appropriate financial arrangements before marriage under the applicable personal status framework.<\/p>\n<p>Each agreement should be prepared according to the parties&#8217; circumstances, the rights involved, and the applicable UAE legal framework.<\/p>\n<h2>Request Assistance with Your Draft Settlement Agreement<\/h2>\n<p>Whether you are resolving an unpaid debt, contractual dispute, commercial claim, shareholder disagreement, or another civil matter, the settlement should identify precisely what is being resolved and what each party must do to bring the dispute to an end.<\/p>\n<p>Abdulrahman Alshaali Advocates &amp; Legal Consultants assists clients with preparing and reviewing settlement agreements under UAE law.<\/p>\n<p>Contact our team to discuss the dispute, proposed settlement terms, and the documentation required to implement the agreed resolution.<\/p>\n<hr \/>\n<h2>Frequently Asked Questions<\/h2>\n<h3>Can a Settlement Agreement Be Signed Before a Court Case Is Filed?<\/h3>\n<p>Yes. Parties may settle a civil or commercial dispute before proceedings begin where the rights involved are legally capable of settlement.<\/p>\n<p>A pre-litigation settlement can document payment, releases, performance obligations, and other terms without first requiring the parties to obtain a judgment.<\/p>\n<p>The agreement should still be drafted carefully because settling the claim may permanently affect the parties&#8217; rights.<\/p>\n<h3>Can a Settlement Agreement Cover Only Part of a Court Case?<\/h3>\n<p>Yes. The parties may resolve part of a dispute while leaving other issues outstanding.<\/p>\n<p>The settlement should identify precisely which claims or issues are resolved and which remain open.<\/p>\n<p>This is particularly important because UAE civil law contains specific consequences where a party settles for part of a claim.<\/p>\n<h3>Can a Settlement Agreement Be Enforced If One Party Stops Paying?<\/h3>\n<p>The enforcement route depends on the legal status of the settlement.<\/p>\n<p>A private settlement contract and a settlement ratified through a statutory mediation or conciliation process may have different enforcement procedures.<\/p>\n<p>A ratified settlement under Federal Decree-Law No. 40 of 2023 carries the legal force provided by that legislation.<\/p>\n<p>The agreement should therefore be structured with enforcement in mind before instalment payments begin.<\/p>\n<h3>Can the Parties Cancel a Settlement After Signing It?<\/h3>\n<p>A valid settlement is intended to bring the relevant dispute to an end rather than remain freely revocable.<\/p>\n<p>Article 680 of the Civil Transactions Law provides that settlement extinguishes the right that was the subject of the dispute and that the parties or their heirs may not thereafter revoke it.<\/p>\n<p>Whether a particular agreement may nevertheless be challenged on a recognised legal ground depends on the facts, applicable legislation, and the circumstances in which it was concluded.<\/p>\n<hr \/>\n<h2>Sources<\/h2>\n<p><strong>Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law.<\/strong><\/p>\n<p><a href=\"https:\/\/uaelegislation.gov.ae\/en\/legislations\/4011\">UAE Legislation Platform \u2013 Official Legislation<\/a><\/p>\n<p><strong>Federal Decree-Law No. 40 of 2023 on Mediation and Conciliation in Civil and Commercial Disputes.<\/strong><\/p>\n<p><a href=\"https:\/\/uaelegislation.gov.ae\/en\/legislations\/2121\">UAE Legislation Platform \u2013 Official Legislation<\/a><\/p>\n<p><strong>Federal Decree-Law No. 46 of 2021 on Electronic Transactions and Trust Services.<\/strong><\/p>\n<p><a href=\"https:\/\/uaelegislation.gov.ae\/en\/legislations\/1539\">UAE Legislation Platform \u2013 Official Legislation<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Draft Settlement Agreement in the UAE A settlement agreement records the terms on which parties resolve an existing dispute or potential claim without continuing the disagreement on its original basis. It may involve payment of an agreed amount, withdrawal of claims, performance of outstanding obligations, return of property, termination of a contract, or another legally [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"parent":910,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-970","page","type-page","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/pages\/970","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/comments?post=970"}],"version-history":[{"count":1,"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/pages\/970\/revisions"}],"predecessor-version":[{"id":979,"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/pages\/970\/revisions\/979"}],"up":[{"embeddable":true,"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/pages\/910"}],"wp:attachment":[{"href":"https:\/\/www.abdulrahmanalshaalilaw.ae\/en\/wp-json\/wp\/v2\/media?parent=970"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}