Sometimes calls a “standstill agreement,” a tolling agreement “stops the clock” on any Statute of Limitations/Statute of Repose which might apply to a legal claim or cause of action between parties to allow for settlement discussions, typically on a without prejudice basis – typically the language of the tolling agreement provides that neither party may treat its existence as evidence or any admission beyond the purposes of the agreement – usually the agreement also states that it does not impact any other rights such as pre-judgment interest. A tolling agreement will set a date from which the tolling should start and a period sufficient for negotiations at the end of which time starts to run.
So to give an example, if the applicable law provides that claim must be brought within three years of a given event, 2¾ years have elapsed, the parties would agree that at the end of say a 6 month tolling agreement (i.e., 3¼ years) the situation for limitation purposes is that on 2¾ years shall have elapsed.