Important points to consider for a settlement agreement

These legal aspects should be included in every settlement agreement:

  • Acknowledgement of debt,
  • Waiver for limitation periods,
  • Acceleration clause to make sure that the outstanding amount can be claimed in case the debtor failed to pay a due installment.

Prescription periods are often due to expire

In most of the cases and especially by fear of imminent expiry by limitation according to German law or laws outside Germany an acknowledgement of the debt together with a waiver where the debtor irrevocably refrains from the objection of the statute of limitation have to be signed.

Judgment by confession

The debtor is required to execute an agreement comparable to a "cognovit note" that includes a provision permitting judgment to be taken against the debtor immediately by confession in the amount of any unpaid balance in the event the debtor did not comply with the terms of the installment agreement.

Simple agreement with signatures but without enforceability, e.g. in the case of a payment suspension one would have to bring an action before the court.

Enforceable deed

Agreement to be concluded before a German Notary Public including immediate enforceability in case the payments are stopped. Additional cost will occur. Debtors might also be more reluctant to accept this version of an agreement.




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Gerald E. Bitzer
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