Explanation of Article 396
The article clarified the two types of settlement, which are: 1- Settlement upon acknowledgment; such as when the buyer waives his right to request the annulment of the sale in exchange for the seller waiving part of the price. It is not considered a settlement contract if the debtor acknowledges the right claimed by the creditor and there is no existing or potential dispute between them regarding its subject, and they agree to change, transfer, expedite, or delay it, and the like; since the subject of settlement is in disputed rights, and this agreement is governed by the provisions established for it according to its nature. 2- Settlement upon denial; such as when two parties dispute over the ownership of an asset and each denies the other's right, they settle by agreeing that one of them takes it and pays compensation to the other. The article affirmed the validity of the settlement in both types; and the settlement is also valid even if the defendant remains silent without acknowledging or denying the claimed right, and it constitutes a settlement as long as the elements of settlement are present in the contract; which are the existence of an existing or potential dispute that the parties intend to avoid by each waiving their claim or part of it to the other in a reciprocal manner.
Related To
Article 396
Reconciliation over rights shall be deemed valid regardless of whether the defendant admits, denies, or declines to admit or deny such rights.