Navigating a Settlement Dispute Between a Waste Management Company and Its Partner

Settling a contract dispute can feel like the finish line. But what if the settlement leaves loose ends that lead to new threats? That’s exactly what happened in a recent case involving a public-private partnership (PPP) in the waste management sector.

In this post, we’ll break down how a settlement agreement between a waste management company and a government partner overlooked third-party risk—and how that created legal exposure even after the dispute was supposedly resolved.

This post offers a real-world look at why clear drafting and comprehensive planning are essential in PPP settlements.

Understanding the Original Settlement: What Was Covered

The waste management company entered a PPP with a local government authority to operate and maintain solid waste facilities. After months of tension over unpaid dues and operational delays, both parties signed a final settlement agreement.

The agreement covered:

• Final account settlement for services rendered
• Termination of ongoing obligations
• Payment schedule and waiver of future claims

It seemed comprehensive. But it had one major flaw.

What the Settlement Missed: Third-Party Risk

The waste management company had worked with a subcontracted technical partner responsible for core aspects of the project. This partner was not a signatory to the settlement.

The technical partner believed it had unpaid dues and expected to be covered under the settlement’s financial resolution.

But since it wasn’t a party to the agreement, it had no legal grounds to enforce the settlement—and instead, it threatened to sue the waste management company directly.

This risk wasn’t addressed during settlement talks. The assumption was that once the government paid the main contractor, the matter was resolved. It wasn’t.

Why This Happens in PPPs

Public-private partnerships often involve multiple layers:

• Government body (employer)
• Main contractor (e.g., waste management company)
• Subcontractors and technical partners

Each layer has its own interests and liabilities. If the settlement only resolves matters between the first two, others may feel excluded and pursue claims.

Lesson: Finality for one party isn’t finality for all.

How We Responded: Legal Strategy Post-Settlement

Our client, the waste management company, faced a formal demand letter from the technical partner. The government partner was no longer involved—they considered the issue closed.

We took the following steps:

1. Reviewed the settlement language to confirm it did not bind third parties.
2. Opened communication with the technical partner to understand their expectations.
3. Assessed documentation showing whether the technical partner had direct rights or assignments.
4. Proposed a mediated resolution to avoid court escalation.

This helped prevent immediate litigation and reopened the door for negotiation.

Drafting Lesson: Define the Beneficiaries

When drafting a settlement agreement in complex setups, make sure to:

• Clearly list all parties and their roles
• State who is bound and who is not
• Use language like: “This Agreement does not extend to any subcontractor or third-party claims unless expressly stated herein.”
• Optionally, attach a release clause for third parties if applicable

These steps can prevent misunderstandings about who is protected or excluded.

Takeaway: Settlements Must Be Structurally Complete

A well-drafted settlement isn’t just about resolving the issue between the two main parties. In PPPs and layered contractual relationships, you must consider:

• All stakeholders with financial expectations
• Silent partners who may later become active claimants
• Downstream contractors and consultants

In this case, the waste management company had to reopen negotiations it thought were closed—because the agreement wasn’t structurally complete.