How Can an Out-of-Court Settlement Be Made?
An out-of-court settlement enables a conflict to be resolved without involving state authorities.
Resolving a dispute through a settlement can be particularly beneficial if the parties are in dispute about the amount of a money claim.
This is because a settlement requires all parties involved to make concessions, taking into account their own litigation risk. Particularly for low value disputes, the commencement of court proceedings is rarely proportionate.
Form of an out-of-court settlement
In contrast to court settlements, out-of-court settlements are purely private law contracts, which can be created flexibly under the principle of freedom of contract. The law does not proscribe any particular provisions for this type of contract, which is a so-called innominate contract (Innominatvertrag).
In principle, an out-of-court settlement can be made in any form desired, meaning that it can also be made verbally, or even by implication. However, for evidential reasons the written form is recommended.
If the dispute relates to enforcement of a money claim, it is particularly important that the settlement is signed by hand or using a qualified electronic signature (see also: Electronic Signatures in Switzerland: Which Signature for Which Contract? ).
Content of an out-of-court settlement
A settlement will normally resolve all matters in dispute between the parties involved. However, it is always advisable to stipulate expressly which claims are covered by the settlement. In particular, if the contracting parties are continuing to do business together, a clear demarcation is needed.
The agreed rights and obligations can be linked to conditions or, where both parties have performance obligations, the order of performance can be stipulated. For example, the settlement could state that payment of the purchase price will only occur following delivery of defect-free goods. In addition, the date or deadline for performance of the contract should be defined.
Finally, a full settlement clause states explicitly that fulfillment of the settlement agreement by the parties conclusively resolves the claims in dispute.
Protection during and following settlement negotiations
During lengthy settlement negotiations it is always important to keep in mind the on-going limitation periods and to seek a written waiver of the limitation defense from the other party, if appropriate. This is because a limitation period will only be halted by the conclusion of a settlement agreement or the commencement of debt collection or court proceedings.
A settlement agreement can be enforced in the same way as any other contract. If the settlement contains a payment obligation which is not met, this can be enforced through the debt collection route. In this case, it is particularly important that an acknowledged debt is confirmed by a wet ink or qualified electronic signature.
This is the only way to ensure that the Swiss debt enforcement procedure (Rechtsöffnungsverfahren) is available, which enables more efficient enforcement.
In addition, consideration should be given as to how fulfillment of the settlement agreement can be ensured. For example, a contractual penalty which is payable in addition to the basic claim in the event of default could be included. Other types of security, such as guarantees or rights of lien can also be considered.