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I've noticed a lot of settlement agreements have confidentiality clauses, stating that the terms and facts of the settlement agreement can't be disclosed. Why would someone want to do this? It seems overall unfair in the sense that if someone else is in a similar situation why shouldn't they seek a similar outcome? From what I've seen this is more common in the US than other places.

Here's an example I found from docracy.com https://www.docracy.com/4488/settlement-agreement

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You reach a settlement instead of a judge deciding a court case if both sides agree that a settlement is better for them than paying court costs, lawyers cost, the risk of losing, having embarrassing details published, distraction for a business, waste of time, and the stress of a court case.

If the plaintiff wants to be able to publish details of the case, there is a lot less reason for the defendant to enter a settlement agreement.

You complain that third parties miss out on possible information. That’s exactly why it isn’t there, because the defendant doesn’t want it to be there.

The defendant might offer “I’ll give you $ 1,000 if you agree not to say a word about the case.” If the plaintiff says “I want $ 1,000 and tell the world about what happened”, then the defendant will likely say “take our offer, or take us to court and our lawyers will do their best so you get nothing”. The defendant will just not offer the kind of settlement you are looking for. And the plaintiff will do what is best for them, not what is best for anyone else.

You have to remember that a settlement cannot be forced upon both sides, it must be something that both sides agree on. It's easiest to agree if you give the other side what they want if it doesn't cost you much, and then get things that you value more in return. As a plaintiff, not telling the world about the case is something that costs me nothing, but may have high value for the defendent. On the other hand, I value cash from the defendent a lot, while the defendent may be rich and can easily afford it. Because both sides have to agree, the terms are likely to incorporate something that both sides want.

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Why is it common for settlment agreements to be confidential? if someone else is in a similar situation why shouldn't they seek a similar outcome?

It has to do with the obligor's intent (1) not to place himself on the weak side of information asymmetry with respect to other plaintiffs, and (2) to make it more difficult for others to conjecture that the wrongs were his fault.

A liable party will always try to minimize the compensation he has to pay. But disclosure of the terms of a prior settlement gives subsequent adversaries information which is useful when those parties engage in negotiations regarding their respective disputes.

Disclosure of the terms of a settlement could also help anyone else conjecture that the issue was largely the obligor's fault, something a wrongdoer usually does not want to happen due to the foreseeable detriment to his reputation.

  • I think it is incorrect to refer to one side in a settlement as the obligor or wrongdoer. People enter into settlements, partly, to avoid arguing about whether or not they did wrong or not. – George White Dec 1 at 20:49
  • @GeorgeWhite Every condition in a settlement implies the existence of at least one obligor (that is, the party who has to comply with that condition) regardless of which party incurred the wrongdoing that led --or is likely to lead-- to litigation. The first paragraph does not imply that obligor and wrongdoer are the same. Instead, what it says (see the term "conjecture" in both (2) and the third paragraph) is that others are likelier to make inferences as to liability just from reading the terms of the settlement. – Iñaki Viggers Dec 1 at 21:21
  • @GeorgeWhite "A settlement might require some performance by both sides". Of course, which is consistent with my mention of "existence of at least one obligor". "You are the one calling one of the parties a wrongdoer". No, I am not. You are just missing the expression "[others'] conjecture" as written in the answer and as emphasized in my previous comment. When referring to "others' conjecture", it can be irrelevant whether actual wrongdoing took place: An innocent obligor may be reasonably concerned that people might make inaccurate conjectures from a settlement. – Iñaki Viggers Dec 1 at 21:36
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    thanks for further explanaion – George White Dec 1 at 22:01

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