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Legal Settlement Exclusion

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LEGAL SETTLEMENT EXCLUSION

This Legal Settlement Exclusion Agreement ("Agreement") is made and entered into as of by and between Party A: , whose principal address is , and Party B: , whose principal address is .

RECITALS

WHEREAS, the parties previously negotiated and entered into a settlement, referenced as (the "Settlement Agreement"), which resolves certain claims and disputes between the parties; and

WHEREAS, the parties desire to clarify the scope of the release and expressly exclude certain claims, damages, obligations, or causes of action from the release effectuated by the Settlement Agreement; and

WHEREAS, the parties agree that this Agreement sets forth specific exclusions to the release and does not modify any other terms of the Settlement Agreement except as explicitly provided herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the meanings set forth below:

"Excluded Claims" means those claims, causes of action, obligations, liabilities or demands described in Section 2 below and any additional items expressly listed in Schedule A attached hereto and incorporated by reference.

2. EXCLUDED CLAIMS

The parties expressly agree that the following categories and items are excluded from the scope of any release granted under the Settlement Agreement and shall survive the execution of that release:

  • Claims for fraud, willful misconduct, or criminal acts committed by a party or its officers or agents.
  • Claims for obligations arising under any separate written agreement identified in Schedule A.
  • Claims that, by law, cannot be released or waived by one or more of the parties.
  • Future claims arising after the effective date of the Settlement Agreement that are unrelated to matters expressly released therein.

3. SCOPE OF RELEASE

Except as expressly set forth in Section 2 and Schedule A, the releases and covenants not to sue set forth in the Settlement Agreement remain in full force and effect. To the extent of any inconsistency between the Settlement Agreement and this Agreement with respect to excluded matters, this Agreement shall control only with respect to the characterization and treatment of Excluded Claims.

4. REPRESENTATIONS AND WARRANTIES

Each party represents and warrants that it has the full power and authority to enter into this Agreement, that the person executing this Agreement on its behalf is duly authorized, and that this Agreement constitutes a valid and binding obligation enforceable in accordance with its terms.

5. INDEMNIFICATION

To the extent any Excluded Claim results in a third-party claim, suit or proceeding against a non-prevailing party that is based upon or arising out of an Excluded Claim attributable to the other party, the party responsible for such Excluded Claim shall indemnify and hold harmless the other party from and against all losses, damages, reasonable attorneys' fees and costs finally awarded by a court of competent jurisdiction or agreed in settlement.

6. NO ADMISSION

Nothing contained in this Agreement or the Settlement Agreement shall be construed as an admission of liability or wrongdoing by any party. All parties expressly deny any such liability or wrongdoing.

7. CONFIDENTIALITY

The parties shall maintain the confidentiality of the settlement terms and the contents of this Agreement except as required by law, regulation, or order of a court or governmental authority, or to enforce the terms of this Agreement; provided that the party required to disclose gives the other party notice and an opportunity to seek protective relief.

8. NOTICES

All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and be delivered to the parties at the addresses set forth below (or to such other address as a party may designate by notice).

9. AMENDMENTS; WAIVER

This Agreement may be amended only by a written instrument signed by both parties. No failure or delay by any party in exercising any right under this Agreement shall operate as a waiver of such right unless such waiver is in writing and signed by the waiving party.

10. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction selected by the parties. The parties hereby submit to the exclusive jurisdiction of the courts of that jurisdiction for any dispute arising out of this Agreement.

11. ENTIRE AGREEMENT; SEVERABILITY

This Agreement, together with the Settlement Agreement and any attached schedules, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, whether written or oral, relating thereto. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force and effect.

12. COUNTERPARTS; EXECUTION

This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Facsimile or electronic signatures shall be deemed originals for all purposes.

ADDITIONAL ACKNOWLEDGMENTS

Each party acknowledges that it has read and understands this Agreement, that it has had the opportunity to consult with counsel, and that it signs this Agreement voluntarily and without duress.

Party A:

By:

Date:

Party B:

By:

Date:

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What the Legal Settlement Exclusion Is and When It Applies

A Legal Settlement Exclusion is a contractual clause or standalone agreement provision that identifies specific claims, liabilities, or categories of losses that the parties agree will be excluded from a settlement or release. It narrows the scope of a release by preserving rights or claims (for example, certain statutory claims, third‑party claims, indemnities, or insurance subrogation). Parties commonly use this language in litigation settlements, employment separations, commercial buyouts, and insurance recoveries to make clear which matters remain actionable after the main settlement is executed.

Why a Clear Exclusion Clause Matters in Settlements

A precise Legal Settlement Exclusion reduces future disputes by defining what is carved out of the release, protecting reserved claims and preserving insurance or regulatory rights. It helps parties avoid inadvertent waivers and provides a predictable risk allocation framework for enforcement and post‑settlement obligations.

Why a Clear Exclusion Clause Matters in Settlements

Who Typically Prepares or Signs a Legal Settlement Exclusion

The Legal Settlement Exclusion is drafted by counsel and executed by authorized representatives of each party to a settlement.

  • Corporate counsel and transaction attorneys who draft exclusion language and confirm enforceability
  • Party signatories with board or delegated authority to enter settlement agreements
  • Insurance adjusters or claims managers who confirm reservation of subrogation or coverage rights

Ensure signatories have authority to bind the party and that execution follows any corporate, trust, or fiduciary formalities required by law.

Roles Who Must Sign and Why

Authorized Officer

An officer or executive with delegated signing authority should sign on behalf of the company. Confirm board minutes or delegation documents to avoid invalidation due to lack of authority; mismatched signers can lead to unenforceability disputes or require ratification.

Individual Party

Individuals settling personal claims must sign personally or through a properly authorized agent. For minor/guardian or estate matters, include court approvals or representative documentation to ensure the exclusion is binding and accepted by third parties.

Essential Data Fields to Include for Legal and Audit Purposes

Effective Date: MM/DD/YYYY
Parties Identified: Full legal names
Excluded Claims: Clear claim list
Signatory Authority: Title and capacity
Consideration: Monetary or non‑monetary
Governing Law: State selection

Consequences of an Incomplete or Incorrect Exclusion

Waiver Risk: Unintended release of claims
Enforceability Issues: Voidable provisions
Litigation Cost: Future disputes increase expense
Insurance Impact: Subrogation rights impaired
Regulatory Exposure: Agency action preserved
Tax Consequences: Potential taxable event

Common Drafting Pitfalls to Avoid

  • Overly broad language that unintentionally excludes statutory claims or third‑party rights and invites litigation about meaning.
  • Vague descriptors such as 'all future claims' without identifying claim types, dates, or subject matter that create ambiguity.
  • Failure to confirm signatory capacity or corporate approval processes, producing enforceability challenges and reopening risk.
  • Neglecting to address insurance subrogation, vendor indemnities, or regulatory notifications which can leave preservation gaps.

Practical Examples of How Exclusions Are Used

Two representative scenarios illustrate common uses of Legal Settlement Exclusions and the drafting choices that follow.

Employment Separation

The employer reserves claims for fraud related to non‑compete breaches

  • carve‑out limited to actions based on fraud discovered after separation
  • The clause preserves employer recovery while permitting employee receipt of severance; include narrow definitions and time limits to minimize dispute.

Commercial Purchase

Buyer excludes post‑closing tax liabilities originating from seller misstatements

  • exclusion specifies tax types and assessment periods
  • This approach protects buyer from unknown tax exposures but requires clear allocation language and access to post‑closing documents for verification.

How to Complete a Legal Settlement Exclusion, Step by Step

Follow these sequential steps to prepare an exclusion that is clear, enforceable, and aligned with the broader settlement terms.

  • 01
    Identify Parties: Name each legal entity and its role precisely.
  • 02
    Define Claims: List specific claims, statutes, dates, and transaction identifiers.
  • 03
    State Consideration: Record any payment or waiver tied to the exclusion.
  • 04
    Execution Details: Include signature blocks, dates, and capacity statements.

Typical Workflow for Drafting and Approving an Exclusion

A standard approval path reduces delays and ensures all stakeholders confirm the exclusion language before execution.

  • Drafting: Counsel prepares exclusion draft and highlights reserved claims.
  • Internal Review: Business, risk, and insurance teams review for exposures.
  • Counterparty Edits: Negotiate carve‑outs and narrow definitions.
  • Final Execution: Authorized signatories sign and date official document.

Core Elements a Professional Exclusion Should Contain

A professionally drafted Legal Settlement Exclusion balances clarity with enforceability; include precise definitions and procedures for preserved claims.

Scope Definition

Precisely define the claim categories, timeframes, and factual predicates being excluded; avoid undefined catch‑all phrases and reference specific statutes or contract provisions when appropriate.

Reservation of Rights

State whether rights to pursue third‑party claims, insurance subrogation, or regulatory remedies are expressly reserved, and specify any notice or cooperation obligations.

Limitations and Timeframes

Include clear temporal limits or discovery windows for preserved claims to reduce indefinite exposure and to align with statute of limitations considerations.

Execution and Authority

Include signer titles, capacity language, and any required corporate or court approvals to confirm the settlement and exclusion are binding.

Drafting Tips to Reduce Post‑Settlement Disputes

Adopt precise drafting habits and procedural checks to avoid ambiguity and unintended waiver of rights.

Use Narrow, Defined Terms
Replace generic language with defined terms that specify statutes, contract sections, dates, or factual circumstances; this reduces multiple interpretations and litigation risk.
Coordinate With Insurance Counsel
Confirm whether the exclusion affects covered losses or subrogation and include cooperation clauses for claims handling and information sharing.
Record Approval Processes
Document board resolutions or delegation of authority when corporate signers execute the exclusion to prevent later challenges to capacity or authority.
Include Notice Procedures
Specify how preserved claims must be asserted post‑settlement, required notices, and timing to ensure the parties understand procedural steps to pursue excluded claims.

Key Milestones After Agreement Execution

Track these milestones to ensure retained claims are preserved and any post‑settlement obligations are timely performed.

01

Execution Date

Document is signed and dated by all authorized parties.

02

Notice Period

Window for notifying counterparties about preserved claims.

03

Insurance Claims

Deadline to submit notices to insurers for potential recovery.

04

Statute Check

Confirm remaining limitation periods for excluded claims.

Common Timeframes and Legal Deadlines to Watch

Certain legal timelines affect preserved claims, tax reporting, and document retention — monitor these deadlines carefully.

Statute of Limitations Review:

Identify applicable limitation periods for excluded claims immediately.

Insurance Notice Deadlines:

Comply with insurer notice timing to preserve coverage rights.

Tax Reporting Window:

Determine whether settlement proceeds or allocations are reportable by tax deadlines.

Record Retention Start:

Retention periods typically begin on the execution or effective date.

Court Approval Deadlines:

If settlement requires judicial approval, calendar required filing dates.

Additional Clauses That Strengthen an Exclusion

Consider these ancillary provisions to make the exclusion operational and legally robust.

Definitions

Provide precise definitions for terms used in the exclusion to ensure consistent interpretation and to avoid ambiguity in enforcement contexts.

Cooperation Clause

Require parties to provide documents and testimony reasonably necessary to pursue or defend preserved claims, with protocols for cost allocation.

Confidentiality

Address whether exclusion terms, preserved claims, or supporting materials are subject to confidentiality obligations or court sealing.

Allocation of Payments

Set out how settlement consideration is allocated among released and preserved claims for tax and accounting purposes.

Third‑Party Rights

Clarify whether third parties (insurers, vendors) retain any direct enforcement or notice rights related to excluded claims.

Amendment Procedure

Describe how the exclusion may be amended, including required approvals and whether amendments must be in writing and signed.

How to Configure an Online Review and Signature Workflow

Set up an e‑workflow that ensures each party reviews the exclusion, attaches supporting exhibits, and executes in the correct order.

Field Configuration
Signer Order Sequential or parallel routing
Authentication Email, SMS code, or advanced methods
Attachments Exhibits and schedules required
Audit Trail Capture IP, timestamp, and actions

Digital Signing Options and Platform Considerations

Ensure the platform supports ESIGN/UETA compliance, offers retention and export functions, and meets any applicable industry or regulatory standards.

  • Authentication: Email, SMS, KBA options
  • Audit Trail: IP, timestamps, certificate
  • File Formats: PDF, DOCX supported

eSignature Vendor Pricing and Feature Comparison

A neutral comparison of entry pricing and commonly required features for executing and storing Legal Settlement Exclusions electronically.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Trial available Trial available Trial available Trial available
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently Asked Questions About Legal Settlement Exclusions

Answers to common execution, enforceability, and technical questions when preparing or signing an exclusion clause or standalone exclusion agreement.


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