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Legal transactions can refer to payments made after a court case or an agreement to settle a case before a judge rules it. The terms of the settlement become a court order that all parties must comply with. Settlements can impose obligations on all parties and are often reached to avoid the expense and damage of a court case. Settlements can also be paid over time, with companies offering cash in exchange for future payments.
There are a few ways in which the term legal transaction can be defined. Sometimes it refers to a payment given at the end of a court case by one party to another. People might think of any paid outcome of a civil court case as “settlement money” or simply call their payment a settlement. In truth, the term more accurately refers to the agreement to settle a case before a judge rules it. This can occur before a process or during one.
Basically, this second type of legal settlement typically means that both parties to a case have agreed to a definite course of action, usually in civil court proceedings. When the parties agree to settle a case, they determine exactly what each party will agree to and, as such, enter into a contract. The presiding judge usually approves this contract, or if the case has not yet reached court, the agreement must be reviewed by a judge. The terms of the legal settlement, provided they comply with the law, become the basis of a court order with which all litigants must comply. Failure to comply with the terms of a legal agreement violates the contract.
It is possible that a legal transaction of this type imposes obligations on all parties. Sometimes in civil trials, a person or group suing an entity must agree to keep quiet about the lawsuit in exchange for a sum of money. Other times, particularly in divorce proceedings, arrangements about money paid, child support, and visitation rights can impact both parties. Therefore, both must comply with the terms agreed upon in resolving the case.
There is often pressure for a legal settlement because court cases are expensive and time consuming. Civil lawsuits involving alleged wrongdoing by well-known companies can also damage a company’s reputation and potentially affect their business in the future. Whether the plaintiff or plaintiff was genuinely wronged may not matter if a court case spans a long period of time and attracts media attention. Reaching a legal settlement with the plaintiff is often in a business’ best interest to avoid time, expense, and a damaged reputation.
It may be helpful to understand the other way the legal transaction is used (as money paid to one party). Sometimes settlements are paid over a period of time and there are companies that will give cash in exchange for future payments from a lawsuit. Usually this means that the person gets less money than they would get if they were able to accept their structured payment plan, but people in need of a lot of financial help may find this option attractive.
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