A contract between two parties where a dispute has arisen about an area of the commercial relationship or contract they have entered into, for example, where payment of an invoice is overdue and the debtor disputes the payment. This agreement sets out the terms on which the parties can agree to resolve the issue (usually for a sum of money less than what is owed or what the value of the dispute actually is).
A settlement agreement is usually offered and viewed as an alternative method of dispute resolution to pursuing a claim in court, and costs both parties involved substantially less in legal fees to arrange (unless they can’t agree on the terms!)
You should not use this document if you want to pursue a claim in court (or some other legal remedy), but note that it will shed good light in the eyes of the court on the party that is open to an agreement before taking things to court. This document assumes that the parties are incorporated in the UK, that the original contract or relationship was governed by English law, and that English law applies to the settlement agreement.