Summary
- A deed of release and waiver is a legal document where one party agrees not to pursue legal claims against another party, commonly used to settle disputes, terminate employment relationships, or finalise commercial transactions in Australia.
- Deeds of release must be executed correctly as deeds (not simple contracts), typically requiring signatures to be witnessed, and should clearly specify which claims are being released and any consideration being provided.
- Employers often use deeds of release when terminating employees to prevent future claims, whilst businesses use them to resolve commercial disputes without litigation and limit liability in various transactions.
- This article explains deeds of release and waiver for business owners in Australia.
- LegalVision is a commercial law firm that specialises in advising clients on commercial contracts and dispute resolution matters.
Tips for Businesses
Ensure deeds of release clearly identify the parties, specify which claims are being released, and state any payment or consideration involved. Have deeds properly executed with witnesses to ensure enforceability. Seek legal advice before signing to understand the scope of rights you are waiving and ensure the deed protects your business interests appropriately.
A deed of release is a legally binding document that formally ends obligations between parties, whether arising from a dispute or an existing agreement. By signing a deed of release, parties discharge each other from specific legal claims and prevent future action on the matters covered. This article will explain how a deed of release works and what rights and responsibilities you are signing away.
Deed of Release
Your business may need a deed of release to end a dispute or agreement. It ensures that no party can carry on with the dispute or agreement. For example, you might resolve a commercial dispute with another party and sign a deed of release. The deed ensures the other party cannot issue legal proceedings against you in the future for the same dispute.
Alternatively, if you are an employer, you may want a departing employee to sign this agreement to agree that they will not make any employment claims against you once they have gone. Overall, whatever its form or purpose, a deed of release will provide certainty and clarity as to how an agreement or dispute should end.
Types of Release
Your business can use a deed of release in different ways, such as:
- resolving a commercial dispute, often in conjunction with a deed of settlement;
- in relation to an employment contract. An employer may give an employee a deed of release as part of a redundancy or other termination agreement or as part of a settlement of a dispute between them;
- ending a personal guarantee. Often, the only way to end a personal guarantee and escape the liability it imposes is with a deed of release;
- terminating a loan or credit agreement. Often, the only way to finalise a mortgage or other finance agreement is with a deed of release.
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Common Mistakes When Drafting Deeds of Release
Common mistakes include:
- Using Overly Broad Language: This includes releasing ‘all claims whatsoever’, which might accidentally include unrelated disputes or future business dealings you never intended to cover. Courts interpret broad language strictly, so you might release more rights than you intended to.
- Failing to Specify Which Claims You Are Releasing: This can create confusion. Instead of general terms, identify the specific dispute, contract, or employment relationship you want to end. Reference relevant dates, agreements, or incidents to make the scope clear.
- Poor Timing of Execution: This is relative to settlement agreements or employment terminations, which can void the entire arrangement. Execute the deed simultaneously with payment or other settlement terms to avoid arguments about whether consideration exists.
Mutual Release
A common feature of a deed of release is a mutual release. It involves both parties agreeing to release each other from all:
- future claims;
- demands;
- debts; or
- other actions as relevant.
For instance, if your business has a payment dispute with a supplier, a mutual release ensures neither party can sue the other for any related claims, such as:
- past invoices;
- delivery delays; or
- quality issues.
In employment terminations, mutual releases often form part of redundancy or termination negotiations. The employer releases the employee from minor contractual breaches or performance concerns that would not be pursued further, while the employee releases the employer from potential unfair dismissal or underpayment claims.
Alternatively, the agreement may state that only one party is released from certain obligations or liabilities, such as a clause that restrains that party’s future employment or trade.
Signing a Deed of Release
You and the other party must sign or execute the deed correctly to ensure the deed is valid and enforceable. It is important that:
- someone who is not part of the deed witnesses your signatures;
- companies execute the deed according to the rules for companies, with the correct number of directors and possibly the company secretary;
- there are enough copies for each of the parties involved to sign;
- one party signs all copies of the deed and then passes that signed copy to the other party for signature. The deed may allow the parties to sign by ‘counterpart’. Accordingly, parties can sign separate but identical copies of the same deed, forming a single binding document together. It is common for parties to scan and forward copies of the deed to other parties by email. The parties exchange these counterparts electronically, with original signed copies sent later by post; and
- you keep printed copies of the deed in a safe place.
This guide provides key information on how to manage a business dispute as quickly and cost-effectively as possible.
Risks of Signing a Deed of Release
Although the agreement provides certainty about the end of a dispute or agreement, it can also limit your legal rights in a matter. A release typically prevents you from pursuing further legal claims about the dispute or agreement, even if new evidence or information emerges. Essentially, you are waiving your rights to future claims.
If the release involves a monetary settlement, you may be restricting your ability to claim further funds owed, and this monetary settlement will usually be the maximum amount you will be entitled to in relation to the dispute or agreement. For example, you might settle a debt dispute by agreeing that the other party pays you a certain sum of money. In this case, a deed of release may restrict you from claiming against that party for further sums, even if you believe they owe you.
Sometimes, the wording of a deed of release may be vague or overly broad in scope. Likewise, you may inadvertently sign away rights and claims beyond what was intended or agreed upon between the parties. However, once you execute the agreement, your rights to appeal, overturn or invalidate the deed of release can be limited under the law.
Further, the deed of release may impact your commercial relationship and negotiating power with the other party if you continue to work together.
Breaching the Agreement
If the other party breaches the deed of release, you can recover compensation if the breach causes your business some loss.
In an employment context, if an employee breaches a confidentiality clause, you may be able to obtain court orders to prevent further misuse or disclosure of information. You may also be able to get compensation for any losses relating to the misuse of information.
In commercial disputes, if a party breaches by pursuing claims they agreed to release, you can seek damages for legal costs and any settlement amounts you must pay. Courts may also dismiss the prohibited legal action and order the breaching party to pay your costs.
Key Takeaways
A deed of release is essential to finalise a dispute or agreement. It ensures no issues can arise in the future. However, you may not be aware of what rights you are giving up when signing this agreement. As such, it is important to get good legal advice before you sign.
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Frequently Asked Questions
Signing a deed of release usually means you give up the right to bring future claims about the dispute or agreement covered by the deed. Even if new information arises later, you may still be prevented from making a claim.
Yes. If the other party breaches the deed, you can seek compensation for loss and, in some cases, court orders to stop the breach. Courts may also order the breaching party to pay your legal costs.
A deed of release is a legal document where you agree not to pursue claims against your employer in exchange for consideration, typically a payment. It finalises the employment relationship and prevents future disputes over matters covered.
Yes, you can negotiate a deed of release, particularly if there are disputes or if your employer offers a settlement payment. Ensure you understand what rights you’re waiving before signing, as deeds of release are legally binding documents.
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