It is a simple fact of modern litigation that most disputes will be resolved by way of deed of release rather than by trial. If you are involved in a dispute, regardless of whether it is a breach of contract, a property dispute or something else, the chances are pretty good that at some stage a deed of release will be contemplated. This article highlights 5 things to look for and think about before signing a deed of release.
What is a Deed of Release?
A deed of release is a form of contract that does not require consideration but which binds the parties. A deed of release also permits a party to bring proceedings, if there was a breach of it, in a longer period than if it was just a simple contract. More often than not a deed of release is used to compromise proceedings without the involvement of a court. Whilst it is probably quite likely that you will have a lawyer acting for you (and this is recommended) there are a number of things you should look for and understand before signing a deed of release.
The Money Clause
Whilst a deed of release might set out a number of rights and obligations the money clause is often the most important. This is the clause that sets out who pays, the amount that will be paid and the due date for payment. In some cases there are conditions and contingencies attached to payment such as a requirement for existing proceedings to be discontinued. Make sure you understand the requirements for payment under the deed and if necessary spell them out so that it is perfectly clear e.g. payment in a foreign currency on a particular date.
In just about all cases the party making a payment will require the other side to release their rights. It is important to understand when, and under what conditions, a release will operate and whether it is only one party releasing the other or a mutual release. A common trap for young players is for the release to operate in all instances rather than to specify just when it kicks in. The release should also be made to be subject to and conditional upon performance of any obligations undertaken in the deed itself.
Bar to proceedings
Usually, there is also a requirement in a deed for a party to sign away its rights to re-agitate the same issues. A bar to proceedings clause offers protection so that it can be pleaded in the case that another action, proceeding or suit is brought. It is usually a smart move to limit the extent and scope of a clause purporting to bar proceedings to the facts and matters that gave rise to the dispute.
Admission as to liability
When parties resolve a dispute by way of a deed of settlement and release there is usually a clause making it clear that the compromise is done without there being any admission as to liability. This is done so that there is in a factual sense no finding of wrongdoing and it creates the impression the parties resolve their differences without actual blame attaching.
Confidentiality and Non-Disparagement
It would be very rare for a party not to require confidentiality. In fact more often than not parties require not only the deed to be confidential but also the negotiations that led up to it and the fact of entry into the deed. This could potentially replace a party in an uncomfortable situation where friends, colleagues and relatives are aware of the being a dispute and then wanting to know how it was resolved. If the deed contained a confidentiality and non-disparagement clause it is generally best to say nothing when someone asks.
A release deed can be an important tool of protection for individuals, businesses and corporations. The document accommodates the interests of both parties. Given that a deed of settlement can be a complex document it is best to obtain legal advice about its meaning and effect. Experience practitioners have seen many instances of parties entering into a deed and then because of its complexity there being a subsequent Breach of Contract suit because it was not complied with in accordance with its requirements.