Don't settle for an incomplete document

Contract Language. By Steven M. Harris, AMNews contributor. Oct. 10, 2005.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

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You may find yourself in a situation where you are asked to review and sign a settlement agreement. Not the kind that you sign to settle a lawsuit -- but a settlement that, typically, you'll sign when you decide to leave a practice and have to negotiate the end of a shareholder or employer agreement. Or the need for a settlement agreement might come up if someone in your group is deemed to have breached a contract, or if the group itself is dissolving.

To get an idea for why settlement agreements can be necessary, consider just some of the issues that have to be taken care of if a physician who is a shareholder in his practice leaves. Severance pay, redemption of stock, and return of buy-in amount are just the start.

A settlement agreement can be identified as a "release and waiver agreement" or a "redemption agreement" if you are surrendering your membership shares or units in the corporation or limited liability company. In consideration for releasing an individual from any future obligations or liabilities, there is often a settlement amount that is paid by one party to the other upon execution of the agreement.

Settlement agreements can be fiercely negotiated depending upon the circumstances, liabilities and dollar amounts involved.

It is important that you put your agreement with the other party in writing.

You should carefully review a proposed settlement agreement to ensure that all aspects of the contractual or employment relationship are addressed, including present and future liabilities and obligations.