Explanation of Article 391
The article defines a settlement contract as a contract intended by the contracting parties to end an existing dispute or to prevent a potential dispute. This is achieved by each party mutually relinquishing their claim or part of it. From this definition, the elements of a settlement contract are evident, which are: 1- The existence of an existing or potential dispute, meaning there must be a serious existing or potential dispute; whether the dispute is judicial, i.e., a lawsuit has been filed before the judiciary; in this case, the settlement is considered a judicial settlement, as long as it is concluded before the final judgment is issued, or the dispute is potential before reaching the judiciary, in which case the settlement is considered non-judicial. 2- The intention of the contracting parties to resolve the dispute; either by ending it if it exists or preventing it if it is potential. 3- Each party mutually relinquishing part of their claim; if one of them relinquishes all their claims and the other does not relinquish anything, this is an acknowledgment of the claim and not a settlement. The definition highlights the main characteristics of a settlement contract, which are: 1- It is a contract of ownership; because it involves relinquishing some of the rights claimed by the contracting parties, and the relinquishment of the right pertains to its essence, not its products or fruits. 2- It is binding on both sides; because the contract imposes an obligation on both contracting parties. 3- It is a contract of exchange; because the relinquishment of the claim is mutual. 4- It is a consensual contract; no specific form or condition is required for its conclusion. From the above, the difference between a settlement contract and other contracts that may be called settlements but are in fact another contract such as sale or gift becomes clear; for example, if a person relinquishes their right without compensation, or sells the right for a certain price; if there is no mutual relinquishment of claims but one party relinquishes their claim and the other does not, such as when a property holder acknowledges its ownership to the claimant and gives them a sum of money in exchange for dropping the lawsuit, this is not a settlement but a sale, and if the claimant relinquishes their claim without compensation, it is a gift, and the provisions of sale or gift apply, not settlement.
Related To
Article 391
Reconciliation is a contract whereby the parties thereto settle an existing dispute or avoid a potential dispute by relinquishing their respective claims or part thereof.