A legally binding contract between the parties to a dispute that embodies their agreement, obligates each to fulfill the agreement, and releases both parties from further obligation to one another that relates to the dispute.

• A. Release
• B. Settlement agreement
• C. Accord
• D. Covenant not to sue

Answer: (B)

The main idea here is a formal way to resolve a dispute that both sides agree to and that ends any further claims related to that dispute. A settlement agreement fits this description because it is a legally binding contract reached to resolve the conflict, sets out what each party will do, and typically includes mutual releases that release both sides from further claims arising from the dispute. This creates a complete closure of the dispute and binds both parties to their promises.

Other options don’t fit as neatly. A release is usually a one-way relinquishment of a claim by one party and doesn’t necessarily bind the other party to any reciprocal obligations beyond what’s stated in the release. An accord is an agreement to accept a different performance in satisfaction of an existing obligation, and the original obligation is discharged only when that alternative performance occurs, which is more about substituting consideration than finalizing a dispute. A covenant not to sue is simply a promise not to pursue litigation in the future; it doesn’t by itself settle all related claims or create the full set of mutual obligations that end the dispute.