A "release clause," or simply, a “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 severely limit legal remedies down the road.
Release clauses can come in a variety of forms and may be used for a wide range of purposes. Typically, releases are employed in the following claims:
- Personal Injury: Often times, activities involving a high risk of injury will be accompanied by a release clause. For example, in extreme sports such as rock climbing, skydiving or hang gliding, a hired instructor may require their clients to sign a release form to avoid being held liable for their injuries.
- Construction projects: Construction contractors often employ a variety of release clauses which prevent the parties from filing a legal claim in the event of a dispute.
- Business contracts: Sometimes a contract between two business partners will contain a release clause. If there is a dispute in the business contract, the release clause will usually direct the parties towards alternative methods of relief such as negotiation or mediation.
It should be noted that the term “release clause” is also widely used in connection with real estate transactions. However, in real estate law, a release clause does not usually refer to the forfeiting of the right to sue. Instead, real estate release clauses encompass two different types of agreements:
1) Buyer Allows Seller to Seek Other Offers: Occasionally, a buyer accepts an offer, but agrees to allow the seller to seek other offers for a limited period of time. Thus, 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 is usually only given 72 hours to find another buyer.
2) Mortgages: Another type of release clause in real estate refers to 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.
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 parties are capable of contracting (i.e., of legal age and mental capacity)
- The parties consent to the clause (cannot be formed under duress or through force)
- The subject matter of the agreement is not illegal
- There is a valid offer and acceptance
- The clause is supported by sufficient consideration
What most release clauses do it prevents litigation involving the subject matter of the contract. 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 previous dealings with one another.
Release clauses are basically contracts and therefore have a binding effect on the parties. If you have issues regarding a release clause, it is advisable that you consult with a business lawyer who specializes in contracts. If you are forming a contract and wish to include a release clause, your attorney can help draft the clause for you. The expert advice of an attorney is the best way to resolve any disagreements or disputes over releases.