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Pre-settlement Agreement

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PRE-SETTLEMENT AGREEMENT

This Pre-settlement Agreement (the "Agreement") is entered into as of by and between Claimant Name: ("Claimant") and Funder Name: ("Funder").

RECITALS

WHEREAS, Claimant has a pending claim or cause of action described as: in Case Number: , currently pending before: .

WHEREAS, Claimant desires to obtain a cash advance to fund expenses and living costs prior to resolution of the claim, and Funder is willing to provide such advance subject to the terms of this Agreement.

WHEREAS, the parties intend that the advance be secured by and payable from the proceeds of Claimant’s claim and any recovery obtained in connection therewith, subject to the terms set forth below.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

1. DEFINITIONS

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

"Advance" means the cash disbursement provided by Funder to Claimant pursuant to Section 2.

"Proceeds" means any and all sums recovered, received or distributable to Claimant from the Claim, whether by settlement, judgment, award, or otherwise, after payment of liens, costs and attorneys' fees.

2. ADVANCE

Subject to the terms and conditions of this Agreement, Funder agrees to make to Claimant a cash Advance in the principal amount of (the "Principal"). The Advance will be disbursed to Claimant on or about , subject to Funder's receipt of all required documentation and execution of this Agreement.

This Advance is: (Select one; if neither box is checked, the Advance shall be presumed non-recourse.)

3. REPAYMENT

Claimant agrees that the Advance, together with all fees, interest and other charges set forth in Section 4, shall be payable solely from the Proceeds. Upon any recovery, Claimant shall first satisfy Funder's entitlement under this Agreement prior to distribution to Claimant or any other party except as otherwise ordered by a court of competent jurisdiction.

If a settlement or judgment is obtained, Claimant shall instruct Claimant's counsel to remit to Funder the amounts due hereunder and to account for such remittance in counsel's settlement statement or release.

4. FEES, CHARGES AND INTEREST

In consideration for the Advance, Claimant shall pay Funder a fee equal to of the Principal plus any applicable interest or default charges. Fee and interest shall be calculated as set forth on Exhibit A, attached hereto by agreement of the parties.

Default interest shall accrue at a rate of per annum on amounts not paid when due, compounded monthly to the extent permitted by applicable law.

5. SECURITY; ASSIGNMENT OF CLAIM

As security for repayment of the Advance and related charges, Claimant hereby assigns, transfers and pledges to Funder all right, title and interest in and to the Claim and any and all Proceeds thereof. This assignment is intended to create a present, valid and enforceable security interest in the Claim and Proceeds.

Claimant authorizes its counsel, third parties, and any settlement payor to remit Proceeds directly to Funder to satisfy amounts due under this Agreement and agrees to execute such further instruments and take such actions as Funder reasonably requests to evidence or perfect such security interest.

6. REPRESENTATIONS AND WARRANTIES

Claimant represents and warrants to Funder that: (a) Claimant is the sole owner of the Claim and has full power and authority to assign the Claim; (b) there are no prior assignments, liens, or encumbrances on the Claim other than those disclosed to Funder in writing; (c) the information provided to Funder regarding the Claim is true and complete in all material respects; and (d) execution and performance of this Agreement will not violate any agreement to which Claimant is a party.

Funder represents and warrants that it has the requisite authority to make the Advance and that it will fund the Advance in accordance with the terms of this Agreement.

7. COVENANTS

Claimant covenants that Claimant will (a) cooperate with Funder and counsel in connection with prosecution and resolution of the Claim; (b) promptly notify Funder in writing of any settlement demand, offer, or agreement; and (c) not enter into any settlement, release, or dismissal of the Claim that will impair Funder's rights without Funder's prior written consent.

8. EVENTS OF DEFAULT

The occurrence of any of the following shall constitute an Event of Default: (a) Claimant's material breach of any representation, warranty or covenant in this Agreement; (b) Claimant's transfer or attempt to transfer its interest in the Claim without Funder's consent; (c) any material misrepresentation by Claimant to Funder; (d) Claimant's insolvency, bankruptcy filing, or appointment of a receiver for Claimant's assets.

9. REMEDIES

Upon an Event of Default, Funder may, at its election, declare all amounts due and payable and exercise all rights and remedies available under applicable law, including but not limited to enforcement of the assignment of the Claim, collection from settlement proceeds, and pursuit of injunctive relief. Funder shall have the right to seek attorney's fees and costs incurred in enforcing its rights to the extent provided by applicable law.

Claimant shall have a cure period of days following notice of default to cure any curable default, unless such cure period would be ineffective or impracticable under the circumstances.

10. NOTICES

All notices required or permitted under this Agreement shall be in writing and delivered to the addresses set forth below by hand delivery, nationally recognized overnight courier, or certified mail (return receipt requested). Notice shall be deemed given upon receipt.

11. GOVERNING LAW; VENUE

This Agreement shall be governed by and construed in accordance with the laws of the State of , without regard to its conflict of laws principles. Any litigation arising out of or related to this Agreement shall be brought exclusively in the state or federal courts located within that State, and the parties submit to the personal jurisdiction of such courts.

12. ENTIRE AGREEMENT; SEVERABILITY; AMENDMENT; WAIVER; COUNTERPARTS

This Agreement, together with any exhibits and schedules attached hereto, 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. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall remain in full force and effect. No amendment or modification of this Agreement shall be effective unless in writing and signed by both parties. No waiver of any breach shall constitute a waiver of any other breach. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

13. CONFIDENTIALITY

Except as required by law, the parties agree to keep the terms, existence and negotiation of this Agreement confidential and not to disclose such information to any third party without the prior written consent of the other party; provided, however, that either party may disclose such information to its legal or financial advisors on a confidential basis.

14. MISCELLANEOUS

The parties acknowledge that this Agreement reflects a negotiated commercial transaction between sophisticated parties and that no provision shall be construed against any party solely because that party drafted such provision. Headings are for convenience only and shall not affect interpretation.

For Claimant

Printed Name:

Signature:

Date:

For Funder

Printed Name:

By:

Date:

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What a Pre-settlement Agreement Is and When It’s Used

A Pre-settlement Agreement documents terms between a claimant and a funding party, attorney, or service provider before a legal case resolves. It typically outlines funding amount or fee, repayment source (settlement proceeds), rights to proceeds, and conditions for payment. These agreements are used in litigation financing, structured legal fee arrangements, and third-party funding. Properly drafted, they allocate risk, define obligations, and set timing for disbursements while preserving court approval where required. Ensure clear identification of parties, consideration, and signature blocks for enforceability.

Why a Clear Pre-settlement Agreement Matters

A well-drafted pre-settlement agreement reduces disputes about funding, protects client interests, clarifies repayment priorities, and documents consent to fee arrangements. It helps attorneys and funders manage risk while preserving ethical and regulatory compliance.

Why a Clear Pre-settlement Agreement Matters

Who Typically Completes a Pre-settlement Agreement

Accurate completion is important for enforceability, client protection, and compliance with state ethical rules regarding fee disclosure and conflicts.

  • Plaintiffs and claimants seeking third-party funding or structured attorney fee arrangements in pending litigation.
  • Litigation funders, finance companies, or investors providing cash in exchange for a portion of future settlements.
  • Attorneys and law firms documenting contingency fee splits, advances, and client consent under ethical rules.

Common Preparation Challenges to Avoid

  • Unclear repayment priority or ambiguous language about which proceeds secure repayment, inviting collection disputes.
  • Failing to document consent or consumer disclosures when required, which can create enforceability and ethical issues.
  • Missing key dates or conditions for funding and repayment, causing timing disputes at settlement.
  • Using vague consideration terms (e.g., "reasonable fee") rather than fixed amounts or defined percentage formulas.

Step-by-step: Completing a Pre-settlement Agreement

Follow these steps in order to prepare a complete and enforceable pre-settlement agreement that documents funding, fees, and repayment terms.

  • 01
    Identify Parties: Enter full legal names and roles for claimant, attorney, and funder.
  • 02
    Describe Consideration: State the funding amount, fee percentage, or formula in plain terms.
  • 03
    Set Repayment Terms: Specify repayment source, priority, and conditions tied to settlement proceeds.
  • 04
    Signatures & Dates: All parties sign and date; include witness or notary if required.

Typical Workflow from Funding Request to Settlement

This sequence shows common stages so stakeholders know when actions and approvals are expected.

  • Request: Claimant or attorney requests funding and submits case details.
  • Offer: Funder issues term sheet and proposed agreement terms.
  • Execution: Parties review, sign, and confirm funding disbursement.
  • Repayment: Settlement closes, proceeds distributed per agreement.

Configuring an Online Pre-settlement Agreement Workflow

Set these core workflow parameters when preparing the document for electronic execution and tracking.

Field Configuration
Authentication Email link or SMS OTP for signer verification
Signing Order Specify sequential or parallel signing per parties
Conditional Fields Show or hide clauses based on funding type
Notifications Automated email on signature, completion, and document delivery

Essential Elements to Include in the Agreement

Include clear, enforceable clauses that define funding, repayment, risk allocation, dispute resolution, and consent to electronic processing.

Parties

Full legal names, addresses, and roles (claimant, attorney, funder). Clarify any assignees or successors to avoid ambiguity at settlement.

Consideration

Exact funding amount and timing. If multiple draws or milestones exist, list each draw, condition, and disbursement schedule.

Repayment Mechanics

Source of repayment (settlement proceeds), priority relative to liens or fees, and procedures for shortfalls or no recovery.

Representations

Statements by claimant about case status, authority to assign proceeds, and absence of conflicting encumbrances or prior assignments.

Default & Remedies

Events of default, cure periods, remedies, and collection procedures, including allocation of costs and attorneys' fees.

Governing Law

Specify the state law that will govern interpretation and dispute resolution; include venue and whether arbitration applies.

Supporting Provisions That Reduce Post-settlement Disputes

Including common administrative and protective provisions prevents ambiguity and speeds settlement processing.

Notice Procedures

Specify how parties receive notices, acceptable delivery methods, and required contact information for settlement disbursement.

Assignment Clause

Define whether and how the funder may assign its rights; address successor liability and notice obligations to the claimant.

Confidentiality

Limit disclosure of financing terms where confidentiality is required, while permitting necessary notices to courts or insurers.

Survival

State which provisions survive termination, such as repayment, indemnities, and confidentiality obligations.

Key Data Elements to Capture for Compliance and Audit

Signer Identity: Full legal name and contact information
Document Version: Unique ID or version number
Signing Timestamp: Date and time of execution
Funding Terms: Principal and fee details
Repayment Priority: Order of distribution from proceeds
Audit Trail: Signed event log and IP data

Consequences of Incomplete or Incorrect Agreements

Enforceability Risk: Ambiguous terms can render obligations unenforceable in court
Ethical Violations: Improper fee disclosures may breach state bar rules
Collection Difficulty: Poorly documented priority leads to competing claims
Regulatory Noncompliance: Failure to follow consumer disclosure laws can trigger penalties
Tax Consequences: Mischaracterized transfers may affect tax reporting
Funding Reputational Risk: Disclosure failures can harm funder and attorney reputations

Time-sensitive Dates to Track in a Pre-settlement Agreement

Document these critical dates so funding, repayment, and termination events are clear to all parties.

Effective Date:

Date agreement becomes operative and governs parties' rights

Funding Disbursement Date:

When funds will be delivered to claimant or attorney

Settlement Deadline:

Cutoff for repayment from anticipated settlement proceeds

Revocation Window:

Any defined period for withdrawing consent if applicable

Record Retention Start:

Date to begin retention clock for compliance purposes

eSignature Vendor Pricing Snapshot for Executing Agreements

Compare entry-level pricing and core features for common eSignature vendors used to execute pre-settlement agreements. Pricing varies by billing cadence and plan features.

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 No No Yes, limited Yes, limited
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
Envelope Cap No envelope cap 100 envelopes/user/year Varies by plan Varies by plan Varies by plan

Frequently Asked Questions About Pre-settlement Agreements

Answers to common questions about execution, enforceability, and electronic signing of pre-settlement agreements.


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