What does a settlement agreement become when it is accepted?

When a settlement agreement is accepted, it transforms into a new contract that discharges previous obligations between the parties involved. This means that the acceptance of the settlement signifies an agreement to resolve the disputes and issues previously addressed in the original contract.

The settlement proposal typically includes terms that both parties must follow, essentially creating a new set of obligations. Once the settlement is agreed upon, the earlier contract is effectively nullified concerning the issues involved in the dispute, as the new terms established by the settlement take precedence. Therefore, it functions as a fresh agreement that outlines how the parties will proceed moving forward, thus discharging the previous obligations tied to the original contract. This highlights the practical legal principle that contracts can be modified or settled through mutual agreement, leading to the replacement of the old terms with new ones defined by the settlement.