A compromise agreement is a legally binding agreement between a business and an employee under which the employee agrees to settle their potential claims and in return the employer will agree to pay financial compensation. Sometimes the agreement will include other things of benefit to the employee, such as an agreed reference letter.
An employee can make a claim against a business under both their contract of employment and under statute. These claims may arise:
In many cases, a business may want to make a payment to an employee in return for an effective waiver of their potential claims. Businesses can enter into an agreement with an employee to settle potential claims when they are still working for the business, but in most situations, their employment will have ended (or be about to end). Although it is usual for compromise agreements to be entered into where employment has terminated (or is about to terminate), it is possible to enter into one where employment is continuing. Although it is usual for compromise agreements to be entered into where employment has terminated (or is about to terminate), it is possible to enter into one where employment is continuing.
The contents of a compromise agreement are largely at the discretion of the business and the employee involved. Examples of common clauses include:
DRAFT OF SIMPLE COMPROMISE AGREEMENT
This Agreement of compromise made at __________ on this ____ day of ___________, 20__ between A son of _____________ resident of ___________________ (hereinafter called Party No. 1) of the One Part and B son of ____________ resident of ___________________ (hereinafter called Party No. 2) of the Other Part.
WHEREAS, disputes and differences have arisen between the parties aforementioned regarding _____________________.
AND WHEREAS, the parties have agreed to settle their disputes and differences amicably between themselves without recourse to litigation and for that purpose are willing to abandon their claims in the manner hereinafter appearing.
NOW, This Deed Witnesseth That It Is Hereby Agreed As Follows:
IN WITNESS Whereof, the parties have hereunto set and subscribed their respective hands, the day, month and year first above written.
Signed and delivered by the Withinnamed A
Signed and delivered by the Withinnamed B
No specific documents are required to execute or draft a simple compromise agreement. However, one must scrutinize the identity proofs of the parties entering into the agreement. Moreover, one should also scrutinize the documents relating to the claims being settled by way of the simple compromise agreement.
No set procedure is applicable in the making of a simple compromise agreement. Once the agreement has been drafted by a lawyer, it should be specifically and carefully read by both the parties to the agreement. Any necessary changes required to be made shall be carried out and once the agreement is finalised, it shall be signed by both the parties along with the requisite witnesses. The agreement is then legally binding when it is printed on judicial stamp paper/e-stamp paper and signed by both the parties. The stamp paper value depends on the particular State in which it is executed. Each party should thereafter keep a signed copy of the Agreement.
A simple compromise agreement is a legal document that includes clauses stating the terms and conditions between the parties. It needs to be printed on a judicial / e-stamp paper of the correct value and signed by both parties. The agreement is required to be registered after stamping with proper value, as per State laws.
While drafting agreements, it is important to know as to what terminology should be used while drafting the same as a small ambiguity in the terms can also jeopardize the claim of the parties. This is why it is crucial to have a documentation lawyer to assist you in drafting an agreement. Being an expert in the area of documentation law, a documentation lawyer knows the nitty-gritty of the legal procedures and the requirements involved in drafting an agreement. With the experience attained in the field, he/she can guide you with the right advice while entering into an agreement and can make sure that such mistakes are eliminated that cannot be resolved even through further legal procedures.