The club was happy to continue to pay Robson, honouring his contract, until he got a new job elsewhere. That wasn't enough for him though, he wanted to be able to get another job (possibly for a rival) and carry on leeching supporter's money off us as well as getting paid for managing another club. So he dragged the club through an expensive court case. It was futile in end for him anyway, as noone wanted him after the out of control dressing room he left at SJP which even the best manager in the world would have found difficult to turn around, and ultimately led to our relegation last season.
IMO if someone is sacked when under a contract, they're entitled to have that contract paid up in full. In Robson's case, that was only a year's money. For the club to demand that he didn't take any job during the duration of that year or forfeit part of the money was the most fantastic cheek, even if it was within the letter of the law. They showed no appreciation whatsoever for what Robson had done for us.
That's why I was so sickened when Shepherd came out with all that public hand-wringing after Sir Bob's death.
The payout was to cover him until he got another job, as is the case with most compensation settlements