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Settlement Agreement?!?!?!

What exactly is a settlement agreement (abbreviated: SA)?

What is a settlement agreement?

3 minuten mr. Jeroen Kaspers kantoor 23 oktober 2024 2025

A settlement agreement serves to terminate or prevent uncertainty or disputes between parties. Essentially, it addresses a disagreement that the parties wish to resolve in a proper and binding (!) manner. The conditions under which the parties settle the dispute are outlined in the settlement agreement. This agreement thus establishes the legal situation between the parties (hence the name "settlement agreement"). A settlement agreement often provides a way to make arrangements that deviate from what the law typically prescribes.

Frequently used in employment law

Although the settlement agreement constitutes a distinct section in our Civil Code—and is therefore not inherently specific to employment law—it is commonly utilized within employment law. Typically, a settlement agreement is drafted to terminate an employment contract. It is sometimes referred to as a termination agreement (being a settlement agreement as defined in Article 7:900 of the Dutch Civil Code).

Characteristics of a settlement agreement

In this brief explanation about the settlement agreement, I will focus on its use for terminating an employment contract. In such a settlement agreement, you make arrangements with your employer about the conditions and manner in which the employment contract will end. Properly documenting these arrangements in a settlement agreement is highly important. Precisely because the law explicitly allows deviations from what "legally applies between the parties," it is advisable to seek thorough advice on the consequences of the arrangements you agree to in the settlement agreement. Once the arrangements are bindingly set out in the settlement agreement, it is not straightforward to retract them (should they later prove disadvantageous to you). After all, this is why you and your employer opted for a settlement agreement: to prevent future uncertainties and/or disputes regarding what legally applies between you both. After signing (and after the expiration of the reflection period), you will generally no longer be able to invoke, for example, error. A judge will assess such an appeal very cautiously. The starting point is that what is agreed upon in the settlement agreement is definitive between the parties. An agreement is, after all, an agreement. Therefore, ensure you are well-advised before signing!

Settlement agreement in the law

For illustration, we refer to the literal text of a settlement agreement in the Dutch Civil Code (BW):

  1. In a settlement agreement, the parties, to terminate or prevent uncertainty or dispute regarding what legally applies between them, commit to a determination thereof, intended to apply even insofar as it may deviate from the previously existing legal situation.
  2. The determination can be established by a joint decision of the parties or by a decision assigned to one of them or a third party.
  3. A proof agreement is equivalent to a settlement agreement insofar as it entails an exclusion of counterevidence.
  4. This title does not apply to an arbitration agreement.

Click here for the legal article (Art. 7:900 BW) and the subsequent articles from Title 15, all of which apply to a settlement agreement.

mr. J.A. Kaspers

mr. J.A. (Jeroen) Kaspers


Jurist en Mediator

Jeroen is specialist ontslag en arbeidsrecht. Met succes onderhandelt Jeroen bij vaststellingsovereenkomsten of disfunctioneren. Komt u er niet uit? Raadpleeg Jeroen via kaspers@wolderwijd-juristen.nl of 036 522 7007.

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