By Ifeoluwa Dannielle Olugbami, Esq
INTRODUCTION
Dispute resolution is a cornerstone of any functional legal system, and in Nigeria, one of the key mechanisms for resolving disputes is through out-of-court settlement. Out-of-court settlements have become widely accepted as a practical and efficient alternative to the traditional litigation process. It offers parties the opportunity to resolve legal disputes privately and amicably without the time, expense, and unpredictability often associated with litigation.
The court, through its decisions and procedural rules such as the High Court of the Federal Capital Territory (Civil Procedure) Rules 2025 [1] and the Federal High Court (Civil Procedure) Rules 2019 [2], encourages parties to explore settlement either directly or through Alternative Dispute Resolution (ADR) mechanisms.
In Ezeonu v. Agheze [3] per Tobi, J.C.A., the court explained that the judiciary is empowered to promote amicable resolution where appropriate, even suggesting settlement suo motu, provided it is done without bias. Similarly, in Alihu v. Ministry of Education Gombe State [4], the Court of Appeal stated that once parties reach a settlement, the court may adopt the terms as its judgment.
This article explores a critical yet often overlooked question: What happens when terms of settlement are agreed upon but not filed or adopted by the court?
WHAT IS AN OUT-OF-COURT SETTLEMENT?
An out-of-court settlement is a voluntary agreement between parties in a legal dispute to resolve their issues without proceeding to trial or a court hearing. It is typically reached through negotiation, mediation, or arbitration and is aimed at achieving a mutually satisfactory outcome.
The Court of Appeal in Wechie v. Okwuworlu [5] described an out-of-court settlement as:
“The settlement and termination of a pending suit arrived at without the court’s participation…. It is legally binding once all parties agree and sign the terms, referred to as ‘Terms of Settlement’”
WHAT ARE TERMS OF SETTLEMENT? Terms of settlement are written agreements outlining the resolution reached between disputing parties. These terms are documented and filed in court, typically accompanied by an application to the court for their adoption as a consent judgment. The Supreme Court in Lawson v Okoronkwo [6] defines terms of settlement as:
“An amicable settlement of dispute by parties out of court without going to the merits of the matter or appeal … a compromise agreement between the parties in litigation … whereby new rights are created in substitution for and in consideration of the abandonment of the claim or claims pending in court. The essence of this compromise is to put a stop to litigation between the parties.”
Once the terms of settlement have been signed by both parties and filed in court, the court adopts the terms of settlement, and it becomes a consent judgment.
WHAT IS A CONSENT JUDGMENT? A consent judgment is a formal court judgment that reflects the terms agreed upon by two or more parties to a dispute during an out-of-court settlement. Once the court adopts and enters an out-of-court settlement, it has the same effect as a judgment delivered after trial. In Brown v Bassey, [7] the court defined a consent judgment as:
“A judgment of court embodying the terms of settlement agreed to by the parties and filed in the registry of the court.”
The Court of Appeal in Galadanchi v Abdulmalik [8] further clarified that:
“…consent judgment is a contract between the parties whereby rights are created between them in substitution for the order of consideration of the abandonment of the claim or claims pending before the court…. It is this amicable resolution of disputes by the parties that is called settlement. When the terms of such a settlement are reduced into writing, it is called ‘terms of settlement’. When the terms are filed, they are called, and the judgment of court. It is then crystallized into ‘consent judgment.’”
Further elaborating on the nature of a consent judgment, the Supreme Court in Vulcan Gases Ltd v G.F. Ind. A.G. [9], held:
“In order to have a consent judgment, therefore, the parties must reach a complete and final agreement on the vital issues in their terms of settlement. They must be ad idem as far as the terms of their compromise agreement are concerned, and their consent must be free and voluntary. The consent judgment emerges the moment the court, on the application of the parties, enters such a compromise agreement as the judgment of the court.”
In essence, a consent judgment combines the autonomy of parties to reach a negotiated settlement with the binding authority of a court judgment, making it a powerful tool for dispute resolution.
EFFECTS OF AN UNFILED TERMS OF SETTLEMENT
- An Unfiled Terms of Settlement Cannot Become a Consent Judgment
For terms of settlement to become a consent judgment, the following must occur:
- The terms must be agreed to and signed by all parties to the dispute.
- An application must be made for the court to adopt the terms as its judgment (consent judgment).
- The terms and the application must be filed at the court where the matter is pending.
Without these steps, the terms of settlement remain a private contract and cannot be made a consent judgment. From the decision of the court in Galadanchi v Abdulmalik [10], it can be seen that it is not until the court adopts the terms of settlement and makes them its judgment (consent judgment) that it becomes binding and enforceable.
2. Unfiled Terms of Settlement Are Not Binding or Enforceable
Terms of settlement that are not filed and adopted as a court judgment lack the legal authority of a consent judgment and are therefore not enforceable. The Supreme Court in Ras Pal Gazi Construction Co. v FCDA [11] emphasised, “Unless and until the court makes the terms of settlement a judgment of the court, it is not binding and cannot therefore be enforced by the court or against any defaulting party.”
The Court of Appeal, in reaffirming this decision, held in Haastrup Line (W.A.) Ltd v Wiche [12] that, “Parties may settle their dispute by consent in the course of the trial. But in order for such a settlement to have a binding effect on the parties, it is imperative that it should have the blessing of the court.” See also Woluchem v. Wokoma [13], Ibezim v. Ndulue [14], and Pacers Multi-Dynamics Ltd v Access Bank Plc [15].
In describing the weight attached to consent judgment, the court in Afegbai v A.G. Edo State [16] held that “when a consent judgment has been obtained, it remains binding on the parties until set aside by a fresh action, if it can be established to have been obtained by fraud.”
3. Unfiled Terms of Settlement do not Put a Stop to Litigation
The mere agreement to settle does not terminate ongoing litigation. It is only when the terms are filed and adopted by the court that the terms of settlement conclude the case, as consent judgments are considered final decisions. Filing terms of settlement prevents the parties from relitigating the same matter. In Isulight (Nig.) Ltd v Jackson [17], the court held that “There is no way a party can resile from an out-of-court settlement without alleging fraud, or undue influence, or non est factum.” Similarly, in C.B.N. v Interstella Comm. Ltd [18], the Supreme Court explained:
“Where parties to a suit in court have agreed with each other as to how to settle their dispute, they are to approach the court to give judgment on the terms they have agreed upon. Such judgments, when given, are consent judgements, as they serve as a final disposal of the dispute between the parties.”
This principle was echoed in Wema Bank Plc v Abiodun [19], where the Court of Appeal confirmed that once the court adopts terms of settlement, the matter is no longer open to adjudication, and the doctrine of estoppel applies.
CONCLUSION
Filing terms of settlement is not merely a procedural requirement; it is a vital legal action that gives life to a private dispute resolution mechanism, providing it with finality and enforceability. Once filed and adopted by the court, the terms of settlement acquire the full force of law, promote judicial efficiency, and secure the finality of the dispute.
For parties entering into an out-of-court settlement, it is essential to ensure that the terms of settlement are properly signed, filed, and adopted by the court. This guarantees legal protection, prevents re-litigation, and ensures the bindingness and enforceability of the terms. Out-of-court settlements offer a collaborative route to dispute resolution, but they only have legal authority when duly formalised before the court.
[1] Order 28 Rule 1 of the High Court of the Federal Capital Territory (Civil Procedure) Rules 2025
[2] Order 18 Rule 1(1) of the Federal High Court (Civil Procedure) Rules 2019
3 4 NWLR (Pt. 187) 631
4 3 NWLR (Pt. 1551) 124
5 11 NWLR (Pt 1469) 95
6 3 NWLR (Pt 1658) 66
7 4 NWLR (Pt. 651) 1
8 1 NWLR (Pt. 1440) 376
9 9 NWLR (Pt. 719) 610 at 645 para H
[10] Ibid
11 10 NWLR (Pt. 722) 559
12 16 NWLR (Pt. 1963) 41
13 3 SC 153
14 1 NWLR (Pt. 216) 153
15 8 NWLR (Pt. 1885) 25
16 14 NWLR (Pt. 733) 425
17 11 NWLR (Pt. 937) 631
18 7 NWLR (PT. 1618) 294
19 9 NWLR (Pt. 984) 1
Source: thenigerialawyer
