The essence of a compromise (settlement) is the final settlement of disputed or uncertain rights or obligations by agreement between the disputing parties. Unless the settlement provides otherwise, it extinguishes the disputed rights or obligations. Where there is litigation, the purpose of a compromise is to prevent or put an end to the litigation. It has the effect of what is called res iudicata – a matter judged – and is an absolute defence to an action based on the settled cause of action. The object of a settlement is to end, or destroy, or to prevent a legal dispute. The effect of a settlement is even stronger than that of a judgment in as much as, unlike in the case of judgments, the parties have consented to the terms on which they intend to settle. Our courts encourage parties to deal with their disputes by way of settlement. When requested to do so, a court has the power to make a compromise or any part of the compromise an order of court and this power will be exercised judicially in terms of a fair procedure.
The matter from which these principles are extracted arose from judgments where the judge refused to accept the settlement between the parties and made extraordinary rulings as a consequence of that bad decision. When parties to litigation confirm they have reached a compromise, a court has no power or jurisdiction to embark upon an enquiry as to whether the compromise was justified on the merits of the matter or was validly concluded. The Supreme Court of Appeal said that the judge’s injudicious overreach had to be strongly deprecated.