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A settlement agreement contains the following term:

Parties agree that this settlement extinguishes all claims each party may have against the other.

What affect does such a term have in theory and in practice?

When a case is dismissed without leave, the plaintiff can't make the same claim again. I here that in reality this has little affect, as the plaintiff can change something small and say it's a whole knew case. Is it the same for settlement agreements?

For example if someone sues someone for damage to rental property, if they settle, could the plaintiff sue again claiming he found more damage than he was first aware of? Could he claim for something unrelated, like if the renter didn't pay in full the last months rent (assuming that hadn't been brought in first case)?

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if they settle, could the plaintiff sue again claiming he found more damage than he was first aware of?

Generally speaking, no. It would be the plaintiff's responsibility to ensure awareness of what he was settling for. For the settlement to be voidable and be entitled to resume the claims, there would have to be additional circumstances, such as:

  • having settled under duress or hardship;
  • settlement being induced by fraud (arguably silent fraud suffices for that);
  • counterparty's breach of the settlement.

These conditions are no different than the principles of contract law.

Could he claim for something unrelated, like if the renter didn't pay in full the last months rent (assuming that hadn't been brought in first case)?

It ultimately depends on the scope and intent (be it inferred or explicit) that can be ascertained from the settlement. That being said, a catch-all phrase such as "extinguishes all claims" tends to make it harder for the prospective plaintiff to prove that his new claim transcends the scope or intent of that clause or settlement.

I here that in reality this has little affect, as the plaintiff can change something small and say it's a whole knew case. Is it the same for settlement agreements?

What they told you about making "a whole new case" by means of making small changes is inaccurate.

Once the controversy has been settled or become res judicata, making small changes to overcome it is a futile attempt to relitigate matters. This applies to all disputes, whether or not they relate to contract law.

If the changes are not so insignificant, the plaintiff is considered to have waived them anyway for bringing them up only when it is too late.

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Judgement

When a determinative forum makes a decision (e.g. a court or an arbitrator) and any appeals have been finalized or the time for making them has expired, then the matter is Res Judicata (a matter already judged).

This serves as a complete and total bar on any claim between the same parties over the same events. A plaintiff cannot "change something small" and try again - the case over these events is done, never to be looked at again. No court or tribunal in any civil or common law jurisdiction will agree to hear the case again if a plea of Res Judicata is made out.

Now, the plaintiff can bring a claim against someone else over the same events or they can sue the defendant over different events providing that these are distinct enough that the plaintiff shouldn't have brought the cases together. However, courts tend to interpret Res Judicata broadly - basically, if a reasonable person should have brought all the claims together then they will be prevented from bringing them separately.

Settlement

A settlement agreement can be submitted to a court or tribunal for it to form the basis of the decision an agreed judgement (for a court) or agreed decision (for an arbitrator). This has exactly the same effect as if the judge or arbitrator had made the decision.

If it isn't, however, then a settlement agreement is likely to be a contract and subject to the same type of challenge as any other contract. Assuming that it is a valid contract and it contained a term similar to the one you quoted then it would operate to exclude any and all claims that fall within the (broad) scope of the agreement. That is, if the plaintiff tried to raise such issues, the primary defense would be that the matter was settled and the contract bars its re-agitation - such a defense would almost certainly succeed.

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