Covering all Bases – The Ins and Outs of a Release & Discharge
Parties to a dispute may consider it desirable to settle the dispute following receipt of legal advice. In some instances, the parties may wish to settle the dispute by way of a written agreement. A type of written agreement often used to compromise a dispute is a release and discharge (or simply, “a release”).
What is a Release & Discharge?
A release is a document (usually by deed) in which a person who has a subsisting or claimed right agrees to surrender/release that right, often in return for compensation. The release may subsequently be relied on by the person to whom it is given to bar proceedings in relation to the subject matter which it covers.
The release is a useful way of preventing a potential litigant and related parties from pursuing an action in the future in relation to the same subject matter to which the release applies. A well-drafted release and discharge will specify the aspects of the dispute which are being compromised. Some agreements use broad and general wording, while others use more specific language. The scope of the release will vary depending on the context. A party who wishes to rely on the release must ensure that it covers those matters which the parties do not wish to be the subject of litigation in the future.
The wording of the Release
A release and discharge does not require any particular formulation of words to be valid but, if it is to serve your best interest, it must cover matters which you intend for it to cover. This is important as there have been cases in our local courts in which the scope and effect of releases have been challenged. If the release is to be enforceable, it must convey a clear meaning to the reader regarding the intention of the parties. To achieve that objective the drafter must use clear and unambiguous language.
Parties to the Release and related parties
The party receiving the release should ensure that all parties competent to compromise the dispute are covered. This is sometimes done by using general wording. For example, if a company is involved in the dispute, the agreement should include reference to directors, agents, affiliated entities and/or insurers. Additionally, the release should say whether it is enforceable against successors and assignees of the claimant. The release may also specifically name other parties if those parties can independently maintain claims in relation to the same subject matter or jointly with other persons.
The person or entity receiving the release may also wish to have the release extend to other related parties who could potentially be joined as defendants to a claim or who may be affected by a finding of liability against them. A common example is a release making reference to the insurer of the party receiving the release. If the liability is insured, the release usually includes reference to the insurer of that party so that a claimant may not initiate proceedings against the insurer in respect of the same dispute.
Provisions of the Release
Releases can be used to cover a host of matters. For example, if the settlement is without admission of liability on the part of the person receiving the release, the document should say so on its face. Most releases will say whether the “defendant” is entering the agreement with or without an admission of liability. The release may also address whether a duty of confidentiality applies in relation to the existence or content of the release, and whether any exceptions apply. For instance, if a party intends to enforce the agreement by court action, they should carve out an exception which allows for enforcement of the agreement in the future.
Sometimes, the release occurs before court proceedings are commenced, while other times it arises during court proceedings. For either of those stages, different considerations apply. If proceedings have already been commenced, the person receiving the release may want to ensure that it includes a clause requiring the claimant to discontinue the court proceedings subject of the dispute. It is also important that the release treats with issues relating to the parties’ legal fees and costs, whether those arising from the preparation of the release or costs entitlements following the discontinuation of the claim. In the ordinary course of things, the person who discontinues the claim is liable for the other party’s costs up to the time when the claim is discontinued.
Now that you have executed the Release, what next?
If you have an obligation to perform an act under the release, it is in your best interest to comply with the provisions of the release to be able to rely on it and enforce it. One example of this is where a party has a payment obligation under the release. That party should ensure that they comply with that obligation. Without consideration, the release may be ineffective. It may not only be money, but you may also have agreed to do something for the releasor. If you fail to do so the court may be unwilling to enforce the release. The court usually looks at the twin factors of “accord and satisfaction”, that is, (1) is there a valid agreement? and (2) was there consideration passing between the parties? If either is absent the release is not likely to be enforced.
A release and discharge may not always be airtight because of matters relating to its drafting or negotiation. It is, therefore, open to a party to proceedings to challenge a release on the basis that it was obtained by (among other things) fraud, duress or unconscionability. If the court finds in favour of any of those arguments, it may set aside the release. An attorney can advise whether it is prudent to settle a dispute/claim, and what provisions are to be included in the release to achieve the best result for you.
Litrow Hickson is an Associate at Myers, Fletcher & Gordon and is a member of the firm's Litigation Department. Litrow may be contacted via email@example.com or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.