How to Use a Deed of Release to Settle a Pay Dispute?

How do you use a deed of release to settle a paid dispute or any dispute about money? Stick around and I’ll tell ya. This one’s important.

All right, Simon here from The Contract Company. Contracts. That’s all we do all day, every day, and sometimes overnight. Lucky us, I know. We are pretty lucky.

Right, so, you’ve got a dispute about money. Could be a paid dispute, could be any sort of commercial dispute about money. How do you use a deed of release?

How to Use a Deed of Release to Settle a Pay Dispute

Well, you need to use a deed of release to have both parties release each other from any sort of future claim. So, what that means is, you’re basically saying one party’s gonna give the other party some money, and the parties both want to make sure, especially the one giving the money, that they can’t be sued by the other one for any transaction or any matter arising out of this dispute in the future.

Basically, a long-winded way of saying, this party pays the money, they want that to be the end of it. So that this party can never come back to them.

The only way to do that is to waive your rights in a deed of release, or mutually release each other. So, what that means is that this party releases that one from any future claims. This party thus releases that one from any future claims.

Which means, if one party like this party, tries to sue that party in the future, this party can hold up the deed of release. This means, that it has been signed, and basically say, “You’ve signed the deed. “Under the deed you’ve released me, “so you can’t bring this action.”

So, that’s why a deed of release is important, because it bars, or stops, those future proceedings. Now, one trick with the deed of release I found out the hard way, is that you want to make it clear in the deed that any rights or obligations that are owing are contingent upon payments.

Now, what does that mean?

A Sample Case

Okay, let’s say there are two parties, and this party agrees to pay this one $100,000 dollars. But, they’re not gonna pay it as a lump sum when the deed’s signed. Instead, this party’s gonna pay $20,000 a month for five months.

So, what has happened, what I’ve seen happen in the past, is the party sign a deed of release.

Breach of the Deed

This party made one payment. Doesn’t make the other four. Now, the problem this party has, is that this one is in breach of the deed, which means this one has the right to sue him for breach of the deed.

Because, you’re allowed to sue for breach of the deed, as opposed to the dispute that arose in the background. But, the problem this one has, is that because the amount to sue for is only $80,000, when I say only, that’s a relatively small matter when it comes to court cases. Because it’s only $80,000 dollars, these guys are gonna be in a tough position trying to get that money from the other bloke.

So, a better way to do it, if you are this bloke, is to make the mutual releases in the deed, and in the future, contingent upon payments being received. That way if the receiving party does not receive one of the $20,000 dollar payments, then the obligations in the deed are dead or don’t arise until such time as the payment is received.

It’s a long-winded way of saying the deeds themselves can also be vexatious. Or they can be troublesome if you don’t understand the risks that can go wrong with them.

But anyway, a deed is the best way to settle any sort of dispute between a party, or between parties I should say, and you do want a mutual release. That is, each party releases the other for any claims in the future or about that transaction or matter.

Anyway, I hope that helps. If you have any questions about this one, give us a call at 1-800-355-455, or Simon@contractcompany.com.au. Thanks very much.

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