Settlement Agreement in Lithuania

Essence of the settlement agreement

By concluding a settlement agreement, the parties resolve an existing legal dispute through mutual concessions, prevent the emergence of a dispute in the future, resolve the issue of court judgment enforcement, or other contested matters.

Form of the settlement agreement:

A settlement agreement must be in writing. Failure to meet this requirement renders the agreement invalid. A settlement is also invalid if it concerns a person’s legal status or capacity, matters governed by imperative legal norms, or issues related to public order.
A court-approved settlement agreement has the legal force of a final court judgment and is enforceable in the Republic of Lithuania.

Invalidation of the settlement agreement:

A settlement agreement may be declared invalid due to a significant imbalance between the parties (Article 6.228 of the Civil Code of the Republic of Lithuania), or on other grounds for invalidity of legal transactions.

1. A settlement agreement may be declared invalid due to significant inequality between the parties (if, at the time of conclusion, the agreement or a specific condition gave one party an unreasonable advantage because that party unfairly exploited the fact that the other party:
   • was dependent on them,
   • had financial difficulties,
   • had urgent needs,
   • was economically weak,
   • was uninformed,
   • was inexperienced,
   • acted recklessly,
   • lacked negotiation experience).

The agreement may also be invalid due to other grounds for invalidity of transactions.

1. If the settlement agreement is based on a legal transaction that was invalid at the time of the agreement’s conclusion, the agreement is also invalid.
2. If the settlement agreement was concluded based on written documents that later turn out to be falsified, the agreement is invalid.
3. The settlement agreement is invalid if, at the time of conclusion, one or both parties were unaware that the issue covered by the agreement had already been resolved by a final court judgment in Lithuania.
4. The agreement is invalid if documents appear after the agreement proving that one of the parties had no right to what was granted in the agreement.
5. A mistake regarding legal provisions (except for imperative legal norms) is not a basis to declare the agreement invalid.