Sunday, January 23, 2011


As part of the settlement of a claim, the parties who will be making payment will usually seek a release in consideration for the making of the settlement payment. A release is the cancellation of a right or claim.  The goal in their requesting the release is to ensure that in the payment of the agreed settlement, there will be no further possible claims that will be made against them.

It’s not uncommon for a release to say that it is a liability release, waiver, discharge and covenant not to sue. What that is really saying is that I agree to release the Supplier from further liability, I agree to waive my rights to make any further claims against them. The agreed payment fully discharges their obligations. I will not sue them again in the future on this cause of action. This eliminates all future claims.

One of the most important considerations in any release is the scope of that is being released.  For example, if you had a problem with a defective product:
  • Does the release cover only the problems that are known at the time of the release?
  • Does it cover all purchases of the product including all past and future problems?
  • Does it cover all potential claims or only the specific cause?

The differences can be substantial and you would not want to release all future rights or ability to make claims without fully understanding the actual scope of the problem.  For example, you wouldn’t want a release signed as a settlement for an epidemic defects claim to prevent you from making claims under Intellectual Property indemnification on all the products where there weren’t problems.

The best advise is any time you are presented with a release to sign, involve your legal support to make sure that it is properly structured so you aren’t giving up any more rights than are necessary for the specific settlement.

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