Release Clauses

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What is a Release Clause?

A Release Clause, or simply, “Release” is an agreement between parties stating that one of the parties will forfeit their rights to a legal claim.  It generally states that the party is relinquishing or giving up their right to sue or bring a lawsuit against the other party.  The signing party must understand that they will not be able to file a lawsuit for any losses or injuries in connection with the release.

Releases may be signed as a separate agreement, or they may be included in the provisions of a contract.  Signing a release can have the effect of limiting the party’s options in the future, so it is advisable to exercise caution when signing one.

When are Release Clauses used?

Release clauses can come in a variety of forms and may be used for a wide range of purposes.  Typically, releases are employed in situations such as:

What are Real Estate Release Clauses?

It should be noted that the term “release clause” is also widely used in connection with real estate transactions.  However, in real estate law, release clause does not usually refer to the forfeiting of the right to sue.  Instead, real estate release clauses can refer to two different types of agreements. 

The first is where the buyer has already accepted an offer, but the buyer agrees to allow the seller to seek other offers for a limited period of time.  The buyer “releases” the seller for a short time frame to find better offers.  These are also known as “72-hour clauses”, as the seller usually has only 72 hours to find another buyer before the sale becomes final.

The second type of real estate release clause deals with mortgages.  A mortgage release clause allows a portion of property to be freed from the mortgage according to the amount of payment that has already been made on the mortgage. 

Which laws govern Release Clauses?

A release clause is basically a contract between the parties.  Therefore, release clauses are governed by the law of contracts.  This means that a final agreement in a release clause is legally binding on the parties. 

In order to be enforceable, the release clause must fulfill all the requirements for a valid contract, such as:

The release clause prevents litigation involving the subject matter of the contract (i.e., the personal injury, construction project, etc.).  However, if there is a dispute as to the enforceability of the release clause itself, the parties may consult with a judge for clarification. 

According to principles of contract law, the parties’ intentions regarding the release clause will be determined as much as possible from the agreement itself.  In some instances the court may consider other factors to determine the parties’ intentions, such as their history of previous dealings with one another. 

Do I Need a Lawyer for issues with a Release Clause?

Release clauses are basically contracts and therefore have a binding effect on the parties.  It is advisable that you consult with a lawyer if you have issues regarding a release clause.  Also, if you are forming a contract and wish to include a release clause, your attorney can help draft the clause for you.  Finally, the expert advice of an attorney can help resolve any disagreements or disputes over releases. 

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Last Modified: 02-18-2011 03:56 PM PST

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