The Co-Existence of Loan Receipt Agreements and Contribution in Illinois

INTRODUCTION Pre-trial settlement is a mechanism widely used to avoid needless and drawn out litigation. 1 Pre-trial settlement not only reduces the burden on overcrowded court dockets, but also provides an injured party with a relatively quick source of compensation. 2 Allowing both parties to negotiate a mutually satisfactory solution is often preferable to judicial resolution.' The number of pre-trial settlement procedures available is limited only by the ingenuity of the parties' counsel." Indeed, public policy considerations constitute the only constraints on the enforceability of settlement agreements. 0 In recent years, the Illinois Supreme Court and the Illinois Legislature have endorsed two practices which could potentially play a major role in influencing pre-trial settlements: the use of loan receipt agreements' and contribution among joint tortfeasors. 7 All. Approximately ninety percent of civil litigation is disposed of prior to trial. Traynor, Lawsuits: First Resort or Last?, 1978 UTAH L. REv. 635-36. 2. Settlements provide prompt compensation for three reasons; they help to avoid (1) the delays associated with obtaining complete discovery before trial; (2) the delays associated with crowded court calenders; and (3) the delays in conducting the trial itself. As one commentator noted, facts "that could be quickly agreed to in dispute-negotiation must be laboriously reconstructed... though both loan receipt agreements and contribution were originally sanctioned to promote settlement, 8 the public policy considerations underlying these devices are not only dissimilar, but actually conflict. In addition to promoting settlement, 9 contribution among joint tortfeasors insures that the rights of nonagreeing parties are taken into consideration in providing for an equitable distribution of liability. The conflict results from the fact that while loan receipt agreements promote settlement, they do so at the expense of an equitable distribution of liability by taking into account only the interests of the agreeing parties. Consequently, nonagreeing parties are often forced to pay a disproportionate share of damages under the terms of a loan receipt agreement in which they did not participate. Because the use of loan receipt agreements contravenes the policy considerations underlying contribution among joint tortfeasors, the viability of loan receipt agreements as an equitable settlement device must be reexamined following the adoption of contribution in Illinois. This article will discuss the operation of loan receipt agreements and contribution in Illinois. The policies upon which each is based will also be examined. Finally, the effect of the adoption of contribution on the continued use …