An out-of-court settlement occurs when the two parties make an agreement on any claim without having a judge come to a decision in the case. Generally, an out-of-court settlement allows one party to pay a sum of money to the other and in return the other party will close their lawsuit. Mainly, a settlement is a lawfully binding agreement which ends the case exclusive of going to court. The best ways to record an out of court settlement is to enter into an agreement that is binding on both parties detailing the terms of settlement. This agreement must be carefully drafted.