Settlement & Release Agreements in Colorado

What Are Settlement & Release Agreements?

Settlements are, in short, agreements to end legal disputes. Settlement may occur through negotiations in the normal course of a legal proceeding, or through some form of alternative dispute resolution, such as mediation or arbitration. Settlement agreements are, in turn, a contractual iteration of the settlement. Settlement agreements are highly favored by public policy and encouraged by Colorado courts, and, importantly, are enforced according to general contract principles in their performance and construction. For more information, give us a call at 720-441-3328 or complete a consultation request form.

Types of Settlement Agreements

A settlement agreement may effectuate:

• A payment or transfer of other property;
• A release;
• A covenant not to sue; and/or
• A covenant not to enforce judgment.

If the settlement involves a payment, parties may further choose to utilize the format of a “structured settlement.”[1] A structured settlement is “an arrangement for periodic payment of damages for personal injuries or sickness established by settlement or judgment in resolution of a tort claim.”[2]

What is a Release Agreement?

Where a settlement involves a release, one party agrees to relinquish their claim(s) against another party. A general release “relinquishes all of a party’s claims against another in exchange for the stated consideration, barring the injured party from seeking any additional recovery,” while, alternatively, a partial release “operates to provide a release of liability for only certain claims and is not intended to release all of the claims the injured party may have as a result of a particular incident.”[3]

On the other hand, a covenant not to sue/enforce judgment functions as a reservation of the right to sue other joint tortfeasors in actions where there are multiple defendants or plaintiffs. This type of settlement was significant historically due to the common law joint-tortfeasor release rule, which attached all parties to a general release unless there was an express reservation of right.[4] However, that common law rule has since been abrogated[5], and the distinction between releases and covenants is notable only in cases involving an employer and employee,[6] or a party suing a principal and agent/employer and employee.[7]

Enforcing or Setting Aside Settlement Agreements

We often get the question from clients “How do I enforce the settlement agreement?”

According to Colorado statute:

If the parties in a dispute reach a full or partial agreement, the agreement upon request of the parties shall be reduced to writing and approved by the parties and their attorneys, if any. If reduced to writing and signed by the parties, the agreement may be presented to the court by any party or their attorneys, if any, as a stipulation and, if approved by the court, shall be enforceable as an order of the court.[8]

As an enforceable order of the court, settlement agreements are essentially contracts and are thus governed by general contract principles. If the agreement is breached, the nonbreaching party may sue to enforce the contract.[9] Additionally, when a dispute “is already in litigation, a trial court may enforce what it finds to be a binding letter agreement for settlement of the dispute.”[10] If you are concerned about another party not abiding by a settlement or release agreement, we might recommend a prevailing party attorney fee provision be included in the agreement so you can recover your attorney fees when you have to move the court to enforce the agreement.

Setting aside a settlement agreement will only occur in the following circumstances:

• Where the release of a claim for personal injury is obtained by trickery and fraud; or
• Where there was a mutual mistake regarding the nature of the injuries.[11]

While obtaining a release by trickery or fraud necessarily requires proof of intent to deceive, mutual mistake is not so clear cut, and its application depends on the circumstances of each case. For example, where parties who executed a release on the basis and belief that fractured ribs and bruises were the extent of the injuries suffered in a car accident, the later discovery of spleen injuries may be sufficient to prove mutual mistake in order to avoid the release.[12] The most important aspect of mutual mistake is the intent of the parties; and, where the agreement involves the release of unknown injuries, circumstantial evidence surrounding the transaction may be brought into court to prove that such a release was that party’s clear intention.[13]

Colorado’s Offer of Settlement Statute

Important caveats and rules pertaining to settlement of civil cases exist in conjunction with the Colorado “Offer of Settlement” statute. In particular, the statute expressly states that:

1. If the plaintiff serves an offer of settlement in writing at any time more than fourteen days before the commencement of the trial that is rejected by the defendant, and the plaintiff recovers a final judgment in excess of the amount offered, then the plaintiff shall be awarded actual costs accruing after the offer of settlement to be paid by the defendant.
2. If the defendant serves an offer of settlement in writing at any time more than fourteen days before the commencement of the trial that is rejected by the plaintiff, and the plaintiff does not recover a final judgment in excess of the amount offered, then the defendant shall be awarded actual costs accruing after the offer of settlement to be paid by the plaintiff. However, as provided in section 13-16-104, if the plaintiff is the prevailing party in the action, the plaintiff’s final judgment shall include the amount of the plaintiff’s actual costs that accrued prior to the offer of settlement.
3. If an offer of settlement is not accepted in writing within fourteen days after service of the offer, the offer shall be deemed rejected, and the party who made the offer is not precluded from making a subsequent offer. Evidence thereof is not admissible except in a proceeding to determine costs.
4. If an offer of settlement is accepted in writing within fourteen days after service of the offer, the offer of settlement shall constitute a binding settlement agreement, fully enforceable by the court in which the civil action is pending.
5. An offer of settlement under this section shall remain open for at least fourteen days from the date of service unless withdrawn by service of withdrawal of the offer of settlement.[14]

Because of these rules, it is imperative that parties to a civil lawsuit in Colorado are wary and understanding of the risks involved with both making an offer of settlement and accepting one.

Settlement agreements are contemplated in most, if not all, cases in Colorado. At Volpe Law, our attorneys are ready to help you with your potential settlement: give us a call at 720-441-3328 or complete a consultation request form for more information on how we can help!

DISCLAIMER

The information contained on this website is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter.  Laws frequently change and therefore this content is not necessarily up to date, nor comprehensive. Contact us or another attorney with any legal questions specific to your matter. You may request a consultation by completing our consultation request form.