Katy Perry -- Rinses Away Hair Lawsuit

Katy Perry has finally untangled herself from a British hair care company ... as the two sides settled a lawsuit over an oral agreement gone wrong.

As TMZ previously reported, Perry claimed a company called ghd (stands for "good hair day") owed her $2 million based on a verbal agreement she had to extend her deal. But ghd claimed they had no such agreement and didn't owe her squat ... because they wanted to cut ties with Katy when the deal expired.

The folks behind ghd struck first, filing a lawsuit against Perry to block her from suing them for the $2 mil.

Last month, the two sides agreed to drop the case completely with both sides giving up the right to re-file.