What is a Deed of Release?
In a commercial disagreement, it may be in everyone’s best interests to sidestep the high costs of litigation. Accordingly, the two sides of the disagreement may agree on, for instance, a sum of money paid from one person to the other in order to put an end to the dispute. Now, the party who paid to put an end to the disagreement may decide to arrange a Deed of Release in order to ensure that the matter has permanently been resolved. This will act to settle the dispute, preventing the party who received the payment from re-opening the dispute in the future.
When to use a Deed of Release
These agreements are commonly used when an employer makes an employee redundant – they will most likely be contained within a document that the employee becoming redundant will sign. The employer will specify the amount of money being paid to the employee due to their redundancy payment, the employee will sign the Deed of Release, preventing the employee from making any claims against the employer in relation to their employment.
In the above scenario where one side agrees not to make any further claims against the other (i.e. upon payment of money the employee (releasor) agrees not to sue the employer(releasee)) this is known as the unilateral or one-way release as one party is releasing the other party. However a Deed of Release can also be two way or mutual, and in this case, both parties agree not to make any future claims against the other in relation to the disagreement.
An important tip – if two or more people are on the same side, but only one of those people enters into the Deed, by law, the other people on their side are covered by the Deed as well. But in saying that it is much better to err on the side of caution and have all parties listed.
Payment not made under a Deed of Release
Okay, so far so good – but there are a couple of limitations to keep in mind. These agreements can be enforced by law. So if for example there was meant to be a payment made under the Deed, and that payment was not paid, then a party to the Deed can sue to have that money paid.
Also, if you are preparing or are being asked to sign a Deed of Release, be sure that you understand what you are being asked to sign and asked to do (or not do as the case may be) under the Deed.
Negotiating a Deed of Release can make all the difference in the world as to your future obligations!