Prepared By: Page 1 of 9 Michael Carabash. One-Sided Settlement and Release Agreements

Transcription

1 Prepared By: Page 1 of 9 Michael Carabash One-Sided Settlement and Release Agreements DISCLAIMER: Please note that the information provided in this DL Guide is NOT legal advice and is provided for educational purposes only. Laws are subject to change and without notice. This DL Guide may be outdated. If you need legal advice with respect to preparing, negotiating, and drafting settlement and release agreements in Ontario, Canada, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. You can contact Michael Carabash directly at. Last Updated: April , Dynamic Lawyers Ltd. All Rights Reserved.

2 One-Sided Settlement and Release Agreements Page 2 of 9 Table of Contents What is a One-Sided Settlement and Release Agreement?... 3 When are they used?... 3 What are the different types?... 3 How is a Settlement and Release Agreement structured?... 4 Consideration... 4 Defining the Released Claims... 5 Payment... 5 Release of Claims... 6 No Claims, Assignment, Assistance, Admission... 6 Confidentiality... 7 Is a Witness Required?... 7 General Terms... 8 About Us... 9

3 One-Sided Settlement and Release Agreements Page 3 of 9 What is a One-Sided Settlement and Release Agreement? A One-Sided Settlement and Release Agreement is a contract with specific terms related to the idea that one party (the Releasor ) will settle a dispute with and release another party (the Releasee ) from liability. More specifically, in exchange for a sum of money or some other form of value, the Releasor will agree not to start or maintain any claims against the Releasee for damages, costs, liabilities, expenses, injuries, etc. associated with the injuries it has or may suffer. In what follows, I ll discuss some general issues that you should be familiar with when drafting and negotiating these types of agreements. When are they used? One-Sided Settlement and Release Agreements can be used in various contexts, such as: The employer wants to provide a termination package An individual is involved in a car accident and is at fault A contractor is being sued for negligence A computer manufacturer is recalling and replacing faulty computers An outdoor company is taking clients white water rafting Basically, whenever a party wants to avoid the hassle of going to court because they may have caused injuries and damages to another party, they would prefer to settle the dispute. To do so formally and to protect themselves, they want something on paper to evidence the fact that the injured party won t go after them at some future time. What are the different types? Worth mentioning is that there are basically two kinds of Settlement and Release Agreements: One-Sided and Mutual. The One-Sided Agreement involves only one of the parties releasing the other party. This type of agreement is used when it is clear that one party was injured as a result of the other party s act or failure to act. The Mutual agreement, meanwhile, involves both parties settling and releasing each other.

4 One-Sided Settlement and Release Agreements Page 4 of 9 How is a Settlement and Release Agreement structured? Various terms and conditions are typically included in a Settlement and Release agreement, such as: Introductory clause Background information, wherein you define the Released Claims (discussed in greater detail below) Payment by Releaseee to Releasor Release of Claims No Claims No Assignment No Assistance No Admission of liability General Terms (some of which are discussed in greater detail below) Consideration Like all agreements, a Settlement and Release Agreement requires Consideration in order to be valid and enforceable. Consideration is something of value given by both parties to a contract that induces them to enter into the agreement. Consideration is typically something like money for goods or services, etc. One party receives something of value and the other party receives something of value. This makes the contract valid, binding, and enforceable. For a Settlement and Release Agreement, the Consideration will likely be the money that is paid by the Releasee in exchange for having the Releasor settle all disputes and agree to release all claims against the Releasee.

5 One-Sided Settlement and Release Agreements Page 5 of 9 Defining the Released Claims In the background section of the Settlement and Release Agreement, you can describe the claims that are going to be settled and released. This description becomes a defined term the Released Claims for ease of reference throughout the rest of the agreement. While the Releasor will want to have a narrow interpretation of the Released Claims (to help cast a wide net of liability on the Releasee), the Releasee will want a very broad interpretation of the Released Claims (to help reduce the likelihood that the Releasor will go after it for future claims). Take the following example for an automobile accident: On or about January 1, 2010, an auto accident involving the parties occurred at approximately 10:30 p.m. on Victoria Park Avenue just north of Sheppard Avenue East which resulted or may result in personal injuries to the Releasor (the Released Claims ). You will notice that, while the accident is described with great detail, only the personal injuries of the Releasor are mentioned as being within the definition of Released Claims. But what about property damage to the Releasor s car? Since that s not mentioned or included in the definition of Released Claims, one could argue that those claims are not released by the Releasor. Ouch! Now you know why it s best to take your time (and perhaps consult with a lawyer) on how to properly define the Released Claims. This will save you a lot of time, money, and heartache. Remember: language is everything! Payment The first part of the body of the Settlement and Release Agreement typically says something to the effect that the Releasor agrees to settle and release the Releasee in respect of the Released Claims in exchange for money. Now, here s where you can get a bit more detailed: 1. When is the money to be paid (e.g. immediately after signing the agreement, within a set period of time, promptly but in any event within a few days, etc.)? 2. How is the money to be presented (e.g. cash, certified cheque, money order, personal cheque, readily available funds, etc.?) and paid (e.g. lump sum, over time, is there a deposit?) 3. Are there any taxes involved that need to be included in the settlement amount (e.g. GST, PST, etc.)?

6 One-Sided Settlement and Release Agreements Page 6 of 9 Release of Claims So now that the Releasor has its money (or other Consideration) and agreed to settle the claims, the Releasee wants to have a bullet proof release of claims section. Not only does the Releasee want to be released from past, present, and future claims of any kind in any forum whatsoever, but it also wants its LEGAL REPRESENTATIVES released as well. So who are these other persons? Well, there s a whole bunch of different terms here worth going over: Heirs: someone who would benefit (under the law) when the Releasee dies without a Will. Executors / Administrators: a person appointed by a testator to carry out his or her will. Successors: typically used for corporations that succeed and assume the obligations of other corporations Assigns: a person who receives the benefit of an assignment, and can include individuals and corporations As you can see, heirs, executors and administrator relate to individuals while successors and assigns can relate to both individuals and corporations. If the Releasee is a corporation, then it will want to include additional parties within the release, such as related entities, officers, directors, employees, and agents, etc. No Claims, Assignment, Assistance, Admission In addition to getting an air-tight release for both itself and important other persons, the Releasee also wants to make sure that the Releasor does not do a few more things. First, the Releasor can t start or maintain any claims. If it has started a claim already, it would be wise on the part of the Releasee to put in a requirement that the claim (and describe it as best as you can) be immediately released, cancelled, settled, etc. with the court at the Releasor s sole expense and that proof thereof be provided immediately thereafter to the satisfaction of the Releasee. You can play around with the language but you get the point. Next, what if the Releasor had previously assigned its rights to go after the Releasee, for example, to its insurance company? Well, the Releasee will want the Releasor to give a representation that it has not, nor will it, assign its rights to be able to go after the Releasee. A full settlement first means that the Releasor is capable of settling (i.e. that it is entitled to go after the Releasee but that it will not because of the settlement).

7 One-Sided Settlement and Release Agreements Page 7 of 9 Next, the Releasee wants and the Releasor to acknowledge that it will not assist any person in any claim respecting the Released Claims. Remember: these are contractual terms so a breach of this term could result in damages being sought and awarded. Finally, the Releasee wants the Releasor to acknowledge that there is no admission of guilt or liability. In fact, the only thing being admitted here is that there is no such admission! Confidentiality Sometimes, particularly when very important matters are being settled and the media is involved, there may need to be a provision in the Settlement and Release Agreement that the parties will keep the agreement (in whole or in part) confidential. Alternatively, the parties may want to have a separate Confidentiality and Non-Disclosure Agreement entered into in conjunction with the Settlement and Release Agreement. Since these Agreements are lengthy and may be complicated, it is best to make them separate from the Release and Settlement Agreement. You can purchase a One-Sided or Mutual Confidentiality and Non-Disclosure Agreement package (which includes the form, video guide, and DL Guides) on Dynamic Lawyers. If that s the case, make sure that any Entire Agreement clause (which effectively says that whatever is in this agreement is the only thing part of the agreement) doesn t invalidate one or the other agreement. Just make an exception in the Confidentiality and Non-Disclosure Agreement for the Settlement and Release Agreement and vice-versa! If you re finding this is too complicated, make a post on DynamicLawyers and get a lawyer to review and revise the agreement so that everything dovetails. Is a Witness Required? There s no statute or common law (i.e. judge made law) that requires that this agreement be witnessed in order to be valid and enforceable. That said, it is a good practice to have a witness in case a dispute arises as to the capacity of the parties to enter into the agreement (e.g. one the parties was drunk or illiterate or didn t understand or appreciate the terms of the contract). Remember: having independent lawyers review and witness the parties signing the Settlement and Release Agreement is a pretty good defence against these and other arguments.

8 One-Sided Settlement and Release Agreements Page 8 of 9 General Terms The end of the Settlement and Release Agreement should include general terms such as: Assignment: can this be done at all, by one of the parties, by both parties consenting in writing? Amendment: can this be done at all, for example, by both parties consenting in writing? Entire Agreement: i.e. this agreement supersedes all other agreements whether oral or written relating to the same subject matters in the agreement Governing Law: which jurisdiction governs the interpretation and enforcement of the agreement? Independent Legal Advice: have the parties received it and are they agreeing voluntarily? Interpretation: singular vs. plural; masculine vs. feminine, section headings, etc. Severability: in case one provision is struck down and rendered invalid doesn t mean the rest of the agreement is Survival of Terms: which terms, if any, survive the expiration or termination of the agreement? Waiver: e.g. no failure or delay of a party to enforce or exercise its rights under the agreement constitutes a waiver

9 One-Sided Settlement and Release Agreements Page 9 of 9 About Us Dynamic Lawyers is a website that allows users to freely and anonymously post their legal issue(s) online and get free information and quotes from Ontario lawyers focusing on the legal area required. Multiple lawyers respond to user posts via and users can follow up with the lawyers of their choosing. Dynamic Lawyers also offers legal forms and a FREE legal checkup. Since launching in November 2008, Dynamic Lawyers has been featured in various local and national media. Michael Carabash is a Greater Toronto Area Business Lawyer and the Founder/President of He can be reached at (647)