Settlement Agreements For Online Business Owners

“A bad settlement is better than a good verdict any day of the week.” -Judge (retired)

During my legal career, I’ve participated in thousands of settlements. Some were small, and others involved millions of dollars. In all cases, the agreements my clients and I negotiated and agreed to were immediately documented in writing.

We do this because the last thing you want after a settlement is a difference of opinion as to what was agreed to or, one party experiencing a case of “buyers remorse.” Believe it or not, this happens all the time.

Online Business Owners

I believe for all the same reasons, and then some, online business owners should do the same thing and quickly document the resolution of all of their disputes and settlements.

I was recently contacted by a relatively well-known online business owner and influencer who’s picture was being used on social media without his consent. He had called out the company using his image and thought he had worked out a settlement for the intellectual property rights violations.

The reason this gentleman called me was because, one week after the settlement was entered into, he once again saw his image being used by the other company. When he reached out, he was told the “settlement” they had entered into only applied to all past use and instances. Future use was permitted. The text messages they sent back and forth to confirm the earlier settlement didn’t address any of this.

Frankly, this type of misunderstanding after a settlement is not an uncommon story. I see and hear about many online businesses that “work out a deal” or “settlement” only to find, later in time, that the issue reappears and often times is bigger than ever. Although a few confirming emails were exchanged and money was paid, in the end, the original problem was still a problem.

Settlement Agreements and Releases

The way you avoid this from happening to you or your online business (please tell me you’re doing business as an LLC or Corporation) is to always prepare and use a settlement agreement to document the terms and conditions of your settlement. Heck, I think this is so important that I keep a blank settlement agreement in my briefcase all the times just in case I need one.

Some settlement agreements are confidential (I don’t like these, especially in sexual harassment cases) but most are simply held private between the parties.

The laws in each state are different, and it’s important to make sure your settlement agreement complies with your state laws and includes all the necessary terms and conditions.

Before we go any further, this would be a good place for me to point out that although I am a California lawyer, and a pretty good one at that, I’m not your lawyer. No legal advice is being given in this post. If you have a legal need or question, use this link to find a good lawyer in your city and state.

In California, I often use the template below for smaller cases. Settlement agreements in larger and more complicated cases often times include additional terms and conditions spanning 5-10 pages long. In any case, I hope this template gives you an idea of what terms and conditions you may want to include in your next settlement agreement.

Again, if you need a good local lawyer to help you negotiate a settlement and prepare an agreement, I recommend this service (many successful online businesses are using it).

If you want to try and put a settlement agreement together yourself, try using LegalZoom or RocketLawyer. If you’re in the UK, keep a close eye on Robot Lawyer LISA (right now just offering NDAs)

Streaming Lawyer Pro Tip: When it comes to settlements involving online businesses and/or their online customers or suppliers, always include a venue or forum selection clause. This will put all parties on notice that if there’s a dispute relating to the terms, conditions, or payment of settlement, that dispute will be mediated, arbitrated or litigated in a specific city and state.


Simply for your review and to compliment the above discussion, here’s a sample settlement agreement and release (DO NOT use this sample template without first having your settlement agreement and release reviewed by legal counsel in your state):


In consideration of the payment of the total sum of $________, in full payment, release and discharge of all claims and demands, ____________(Party #1), the undersigned, on behalf of himself/herself/itself, and his/her descendants, dependents, heirs, executors, administrators, assigns, representatives and successors, does hereby fully release and discharge _________(Party #2), and each of said parties’ assigns, agents, attorneys, claims adjusters, officers, directors, servants, stockholders, employees, representatives and successors from all rights, claims, demands, and causes of action which said party and said party’s above-mentioned successors now have or which may hereafter accrue as a result of the incident, casualty or event which occurred on or about ________(date of incident), including but not limited to any and all causes of action which are alleged in the action entitled _______________ (case name and number), and any and all claims or causes of action for any alleged breach of covenants of fair dealing, any alleged breach of or violation of Insurance Code Section 790.03, and any alleged unfair settlement practices in connection with the processing of the above claim and the defense of the above reference legal proceeding.

It is understood and agreed that this settlement is the compromise of doubtful and disputed claims, and that the payment made is not to be construed as an admission of liability on the part of the party or parties hereby released, and that said releases deny liability therefore and intend merely to avoid litigation and buy their peace.

It is further understood and agreed that all rights under Section 1542 of the Civil Code of California and any similar law of any state or territory of the United States are hereby expressly waived. Said section reads as follows:

“Section 1542. General Release- – Claims Extinguished. A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”

The undersigned further acknowledges that this Release and its reduction to final written form is the result of good faith negotiations between the parties, and involving their respective counsel.

The undersigned, as claimant, further acknowledges that this Release is written notice of settlement of claimant’s third-party liability, if necessary, pursuant to Business and Professions Code Section 6149.5.

The released claimant agrees to be solely responsible for all liens, actual or prospective, asserted by any person or entity not a party to this agreement. Said responsibility on the part of the released claimant shall extend to all liens arising from any medical treatment rendered on behalf of the claimant, any disability payments made to the claimant, and any and all subrogation claims arising from the subject incident. In the event of any legal action or proceeding of any nature instituted by any third party against the parties released in this agreement, the released claimant agrees to defend and indemnify said released parties in any said third-party action.

The undersigned released claimant further declares and represents that no promise, inducement or agreement not herein expressed has been made to the undersigned, and that this Release contains the entire agreement between the parties hereto, and that the terms of this Release are contractual and not a mere recital.

A copy (digital or otherwise) of this Settlement Agreement and Release is valid as an original.

DATED: __________

PARTY #1: _______________

DATED: __________

PARTY #2: _______________


Mitch Jackson is an award winning California trial lawyer who enjoys combining law, social media and technology to disrupt, hack, and improve his clients’ companies, causes, and professional relationships. He also enjoys using social media to help win his client’s cases. Connect with Mitch on social here.


Author: Mitch Jackson

I'm a California trial lawyer trying to fix the world one client, cause, and digital interaction at a time.

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