A meeting room at 5pm, two cold mugs and a printer finishing one page.

wolfx. Answers Search answers about getting paid Get started

How do I write a settlement agreement for a disputed invoice?

The short answer

One page, both signed. Name the invoice, the sum, the pay-by date and everything each side gives up. Once a debt is overdue, the law leaves you free to agree terms about it1, so the agreement can drop the interest, and the fixed sum with it, and should name both. Signed as a deed, it can usually be enforced for 12 years8 instead of 67.

Mara, WolfX research desk
Written with AI, checked by a person · 8 October 2026

England and Wales only. WolfX is software, not a law firm.

What you can add

A £5,400 invoice settled at £4,800

Say you invoiced another business £5,400, due on 15 July 2026, and they dispute £600 of it. On 30 September 2026 it is 77 days late and you both agree £4,800, paid by 14 October 2026. Bank Rate was 3.75%4 on 30 June 2026, so for an invoice that went late in the second half of 2026 the yearly rate is 11.75%.

The invoice£5,400.00
Interest: £5,400 × 11.75% ÷ 365 × 77 days3£133.85
Fixed sum (invoices from £1,000 to £9,999.99)2£70.00
Dropped by agreement: the £600 in dispute and the two additions above−£803.85
Paid under the agreement by 14 October 2026£4,800.00

The full claim that day was £5,603.85. If the £4,800 is not in by 14 October 2026, you can claim the £4,800 under the agreement, or go back to the full claim, which grows by £1.74 a day.

The road ahead

Seven steps. All free.

Step 1: Agree the figure first, without prejudice
Keep offers marked without prejudice until both sides accept the same figure. A phone call alone leaves nothing to point to later.
Cost: FreeTime: A day or two
Step 2: Set the full claim beside the deal
Work out what you could claim today, then what you are dropping. In the sum below that is the disputed £600, the interest and the fixed sum, and the agreement names all three.
Cost: FreeTime: 10 minutes
Step 3: Check both sides give something
A promise to take less usually binds you only if you get something back. Here each side gives something: you drop the disputed £600, the interest and the fixed sum, and the client drops its dispute and any claim about the work. If only you give something up, sign it as a deed.
Cost: FreeTime: 5 minutes
Step 4: Fill in the agreement below
It fits on one page. Add the invoice number, the sum, the pay-by date and the bank details, and keep the clause that names the interest and the fixed sum.
Cost: FreeTime: 20 minutes
Step 5: Sign it, as a deed if only you give something up
A deed must make clear on its face that it is a deed5. An individual signs in front of a witness who also signs. A company signs by two directors, or a director and the secretary, or one director in front of a witness6. On a large sum, ask a solicitor who does debt recovery.
Swap signed scans by email and keep both. An email with both signed PDFs attached is a record.
Cost: FreeTime: Same day
Step 6: If a court claim has started, deal with it
Add a line saying who ends the claim and who pays the court fee, and tell the court at once11 that it has settled; see also accepting less in full and final settlement.
If they defend a claim of £10,000 or less, you must attend the court's free mediation10, and a deal made there binds you.
Cost: FreeTime: 10 minutes
Step 7: Diary the pay-by date
If the money lands on time, the agreement has done its job. If it does not, clause 5 lets you claim the agreed sum, which they signed for, or go back to the full invoice with interest and the fixed sum. Going back reopens their dispute.
Cost: FreeTime: 14 days

A letter you can copy

Short settlement agreement

Use it once both sides have agreed the sum in principle and you are ready to put it in writing.

New email

SubjectSettlement agreement: invoice

Dear , As agreed, here is the settlement agreement for my invoice . Please sign and return it by . If you believe any of this is wrong, please tell me before that date and say why. Kind regards, ---------- Settlement agreement Date: Between: (1) , company number (the Supplier); and (2) , company number (the Client). 1. The invoice. The Supplier issued invoice , dated , for . The Client disputes part of it. The parties have agreed to end the dispute on these terms. 2. The payment. The Client will pay the Supplier by , by bank transfer to: 3. What the Supplier gives up. When reaches the Supplier's account, the Supplier accepts it in full and final settlement of invoice and of every claim about that invoice and the work it covers. That includes the rest of the invoice, interest under the Late Payment of Commercial Debts (Interest) Act 1998, and the fixed sum under section 5A of that Act. The Supplier will not claim any of them. This agreement does not cover any other invoice. 4. What the Client gives up. On the same payment, the Client withdraws its dispute and will make no claim against the Supplier about invoice or the work it covers. 5. If the money is not paid. If has not reached the Supplier's account by , clauses 3 and 4 do not take effect, and the Supplier may claim either under this agreement or the full sum of invoice , with the interest and the fixed sum named in clause 3. 6. Court claims. Neither party has started a court claim about this invoice. 7. The whole agreement. This agreement is the whole deal about invoice . It is governed by the law of England and Wales. Signed for the Supplier by : Signature: ____________________ Date: ____________ Signed for the Client by : Signature: ____________________ Date: ____________

Tap a highlighted gap to see what goes in it.

Email the draft as a file first so both sides can fix the wording. When it is agreed, each side signs and scans it, and each keeps both signed copies. To make it a deed, add 'This agreement is a deed.' under the title. An individual signs in front of a witness, who signs and adds a name and address. A company signs by two directors, or one director and such a witness. If a court claim has already started, replace clause 6 with a line saying who ends the claim and who pays the court fee.

When not to bother

When it isn't worth it

The sum is small and the client is worth keeping. An email that both sides confirm may be enough, if it names the sum, the pay-by date and what is dropped.
The dispute is about quality, not money. Sort the repair first, in the quality dispute page, because a settlement signed before that can leave the real problem open.
The client is in trouble and the deal may not be paid. Ask for part now and the rest by instalment, and make one missed payment bring the whole sum back. A part payment restarts the six years9 for the rest.
The sum is large. Use a solicitor who does debt recovery; the fee is small beside the risk of a clause neither side understood.
The client is in Scotland or Northern Ireland. The deed rules and time limits here are for England and Wales, and the route differs elsewhere.

The Wolf's note

A settlement with no sum and no date is a hope with two signatures on it. Name the figure, the pay-by day and everything you are dropping. After that the only open question is whether the transfer lands.

Mr. Wolf · the AI inside WolfX

What comes next