Q&As

Is a settlement agreement legally binding as a contract if there is no consideration in the agreement?

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Copyright © 2025 LexisNexis
Produced in partnership with Richard Colbey of Lamb Chambers
Published on: 11 December 2018
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For the purposes of this Q&A, we have focussed on Agreements to refrain from instituting or continuing proceedings eg under the Employment Rights ACT 1996 (ERA 1996) which satisfies the conditions regulating Settlement agreements (see ERA 1996, s 203(2)(f) and (3)). This Q&A also considers settlement in the commercial context.

Settlement in the employment context

There is no specific requirement eg in ERA 1996, s 203(2) and (3) that consideration must be provided. However, a settlement agreement is a Contract, and normal contractual principles will therefore apply, ie there must be an offer, acceptance and consideration (in relation to consideration, see Bank of Credit and Commerce International SA v Ali).

For further information on settlement agreements in employment generally, see:

  1. •

    Practice Note: Settlement agreements in employment—legal requirements

  2. •

    Practice Note: Settlement agreements in employment—practical and tax issues

  3. •

    Precedent: Settlement agreement (employment)

For information generally on what is required to ensure that there is a valid contract

Richard Colbey
Richard Colbey

Lamb Chambers

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Settlement definition
What does Settlement mean?

The payment or collection of proceeds after trading a security. Settlement usually takes place some time after the deal and price are agreed.

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