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If you have been asked to sign a deed of release, it is essential you know what it means and what you are committing to when signing it. The agreement is a concise, legally binding document that parties use to resolve a dispute or end some form of agreement between them. In essence, a ‘release’ is a discharge of obligations. This article will explain how a deed of release works and what rights and obligations you are signing away.

Why Do I Need a Deed of Release?

Parties need a deed of release to bring a dispute or agreement to an end. It ensures that no party can carry on with the dispute or agreement. For example, if you resolve a commercial dispute with another party, you will want a deed of release. This will ensure the other party can’t issue legal proceedings against you once you have signed a settlement agreement.

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.

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. Therefore, it is important to understand exactly what rights you are giving up by signing the release. Furthermore, it is essential to understand the consequences of giving up those rights. For example, if you settle a debt dispute by agreeing that one party will pay you a certain sum of money, a deed of release may restrict you from claiming against that party for further sums, even if you believe they are owed. For these reasons, ensure you get good legal advice about what rights you are giving up in signing a deed of release.

Types of Release

Deeds of release can be used 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. As with a personal guarantee, often the only way to finalise a mortgage or other finance agreement is with a deed of release.

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What Is a 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.

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.

How Do I Sign a Deed of Release?

It is essential that you and the other party 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 in accordance with 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 then passes that signed copy to the other party to sign. The deed may allow the parties to sign by ‘counterpart’. This means that parties can sign separate but identical copies of the same deed, which together form a single binding document. 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;
  • you keep printed copies of the deed in a safe place.

What Happens If One Party Breaches The Agreement?

If one party breaches the deed of release, the innocent party can recover damages for any loss that the breach caused. 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.

Key Takeaways

A deed of release is essential to make sure you finalise a dispute or agreement and there are no issues that can cause trouble down the track. However, you may not be aware what rights you are giving up when signing this agreement so it is important to get good legal advice before you sign.

If you have any questions about deeds of release or need assistance drafting or reviewing a deed of settlement, you can contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is a deed of release?

A deed of release is a concise, legally binding document that parties use to resolve a dispute or end some form of agreement between them. In essence, a ‘release’ is a discharge of obligations.

Does a deed of release have any risks?

The risks of each agreement will vary depending on the circumstance. However, it can certainly limit your legal rights in a matter. For example, if you settle a debt dispute by agreeing that one party will pay you a certain sum of money, the deed of release may restrict you from claiming against that party for further sums, even if you believe they are owed.

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