1. Why Back Out of a Settlement Agreement?
2. Good Faith in Settlements
3. Can I Back Out of a Settlement If I Verbally Accepted But Didn't Sign It?

Updated July 8, 2020:

Can you back out of a settlement agreement? If you agreed to settle a claim but later changed your mind, there are certain factors that will influence the outcome.

Why Back Out of a Settlement Agreement?

First, it is important to consider if the settlement was either a written settlement or an oral settlement. In the majority of cases, when a party tries to withdraw from an agreed-upon settlement, the court will have to make a final decision as to whether the agreement is enforceable or not. Additionally, a determination must be made as to whether each party clearly understood the consequences, the nature, and the extent of the settlement that was initially agreed upon.

If you obtain information that causes you to change your mind regarding the settlement, it may not change whether the settlement is valid. Courts may annul settlement agreements that were attained through misrepresentation, fraud, or unfair terms. However, if a proper agreement was drafted, the settlement can be carried out under a state's code. This means if you back out of a legitimate agreement, you can be subject to damages if the final judgment was not in your favor.

If one party is favored due to a stipulation, the case may be annulled or reopened if the stipulation was based upon the following circumstances:

  • Neglect.
  • Inadvertence.
  • Mistake of law or fact.
  • Fraud.

Unless the damages you face for breaching the settlement are significantly minor, then you will be accountable for what is outlined in the agreement. Remember, if the other party hasn't signed off on the agreement, you may still withdraw from the contract. It is important that this is done in an appropriate time frame. If the party has signed the agreement paperwork, then you may retract the contract under the following conditions:

  • The agreement contains a provision which permits rescission.
  • The other party allows you to rescind.

Good Faith in Settlements

In most injury cases, a settlement agreement may be reached without ever involving a judge. However, as in the case of any contract, the agreement must have the implicit understanding to enter into it in “good faith.” In law, when a party operates in “good faith“ it refers to acting in honesty and keeping promises without holding individuals to an impossible standard or taking unfair advantage of other people.

If your attorney or either party somehow lured you into to a settlement that is fraudulent or misrepresented, there may be an opportunity to nullify the agreement. Just like any other binding contract, an agreement can be deemed voidable if one party is:

If any of these circumstances arise, a court may likely hold a hearing in order to determine if an agreement was reached in “good faith.”

Can I Back Out of a Settlement If I Verbally Accepted But Didn't Sign It?

Once you have agreed to a contract, essentially it has been formed. Just because it has not been documented in writing does not mean that a contract hasn't been established. If one party has made an offer and you accepted, a contract has been formed and you can be held accountable to it. At this time, the issue becomes one of justifying proof.

If your actions show that you accepted the agreement and physically acted with an intention to adhere to it, but did not follow through, then the other party may be favored in a lawsuit. Having any evidence of your objection, such as written documentation or witness testimony can also be used against you in a court of law. Remember, lawsuits can be extremely costly. It is highly recommended to try to work with the other party in order to try to reach a mutual understanding in order to save time and money.

Settlement agreements that are discussed orally are considered enforceable contracts. Depending on the laws of your state, the court may be able to enforce an oral agreement between two parties. Therefore, oral contracts that occur in the workplace are also enforceable by law.

Typically, oral contracts set up between an employee and employer must be sufficiently specific and detailed to be deemed contractual. If you decide to sue your employer for breach of contract, the employer, in turn, can countersue in an attempt to recover any funds that were awarded in the verdict.

If you need help determining whether you can back out of a settlement agreement, you can post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.whether your contract is binding is to consult with an attorney that has experience in these types of settlement cases.