A Stipulated Judgment Can Be A Great Option for a Defendant (Includes Sample)

A stipulated judgment is a powerful tool that can ensure compliance with the terms of a settlement agreement. From the defendant's perspective, agreeing to this type of provision may seem like a significant risk, but it also provides several strategic and practical benefits that outweigh the risks under certain circumstances. Understanding these benefits can help attorneys and businesspersons appreciate why a defendant might accept a stipulated judgment as part of the resolution process.

What Is a Stipulated Judgment?

A stipulated judgment is a pleading where the defendant consents to the entry of judgment against it if certain conditions of the settlement are not met. In typical cases involving installment payments, the defendant agrees to make structured payments to the plaintiff over time. If the defendant fails to meet these obligations and does not cure the default within an agreed-upon period (e.g., five days), the plaintiff can file the stipulated judgment with the court, which will then enter judgment in favor of the plaintiff for the full settlement amount, minus any payments already made.

Sample Stipulated Judgment

Download a sample stipulated judgment here. Of course, by providing this sample, I am not giving any kind of legal advice. Have the stipulation reviewed by competent counsel before use.

Why Would a Defendant Agree to Such Terms?

1. Avoiding a Larger Immediate Financial Liability while Maximizing the Settlement Amount: Including a stipulated judgment as part of a settlement agreement may resolve the parties competing interests. A defendant may face liquidity constraints that make paying a large settlement amount in one lump sum unfeasible. Oftentimes, a plaintiff will settle for less money paid in one lump sum than a larger sum paid in installments. However, if the plaintiff is focused on the largest-possible recovery, then the plaintiff may agree to a settlement amount paid over time. Thus, including a stipulated judgment may solve the defendant’s short-term liquidity problem and the plaintiff’s desire to maximize the recovery.
2. Maintaining Control Over the Payment Process: By agreeing to a stipulated judgment, the defendant can structure the settlement in a way that allows for more manageable payments over time. This approach gives the defendant breathing room to fulfill their financial obligations without the threat of immediate collection proceedings. The stipulated judgment serves as an assurance for the plaintiff but does not go into effect unless the defendant defaults, allowing the defendant some flexibility as long as payments are timely.
3. The Opportunity to Negotiate Favorable Cure Terms: Defendants can negotiate the terms of the cure period in case of a default. For example, if a payment is missed, the defendant is typically granted a specified number of days to cure the default after receiving notice from the plaintiff. This provision acts as a safeguard, giving the defendant an opportunity to correct minor payment delays without automatically triggering the stipulated judgment. In this way, defendants can protect themselves from inadvertent defaults due to administrative errors or temporary financial setbacks.

Potential Risks for the Defendant

Of course, agreeing to a stipulated judgment is not without its risks. The most significant risk is the possibility of missing a payment, which could result in the plaintiff quickly obtaining a court judgment for the full amount, leading to garnishments or other collection efforts. Additionally, depending on the terms of the agreement, there may be limited room for negotiation or renegotiation once a default occurs.

However, by entering into the agreement with clear knowledge of their financial position, and negotiating reasonable cure periods and payment terms, defendants can mitigate these risks while enjoying the benefits of avoiding trial and managing their financial obligations.

Conclusion

For defendants, agreeing to a stipulated judgment is often a pragmatic decision driven by financial realities and the desire to avoid prolonged litigation. The installment payments, cure periods, and overall structure of these agreements provide flexibility, while the stipulated judgment provides a fail-safe for the plaintiff. When handled correctly, such provisions allow both parties to achieve a resolution that protects their interests while minimizing the risks of ongoing litigation.

Attorneys representing defendants should carefully negotiate the terms of any stipulated judgment, ensuring that the payment schedule is realistic and that the cure periods offer sufficient protection in the event of a temporary default. With careful planning, a stipulated judgment can be a beneficial component of a settlement agreement.