Which term refers to an agreement that settles a dispute outside of court?

The term that describes an agreement that settles a dispute outside of court is mediation. Mediation involves a neutral third party who facilitates communication between the disputing parties to help them reach a mutually acceptable resolution. This process is generally voluntary, allowing the parties to maintain control over the outcome and reach a settlement that works for both sides without the formality of a court trial.

While arbitration also settles disputes outside of court, it typically leads to a binding decision made by the arbitrator, meaning the parties usually cannot dispute the outcome further. Plea bargaining refers specifically to negotiations in criminal cases where a defendant may agree to plead guilty to a lesser charge, and conflict resolution is a broader term that encompasses various processes aimed at resolving a disagreement, which may or may not involve legal disputes. Thus, mediation is the best fit for the definition given in the question.