The Importance Of Written Release Agreements

A well-drafted written release agreement can protect your company from a lawsuit.  A release is a written agreement where one party releases the other party from potential liability, usually in exchange for a payment of money or some other form of consideration. That consideration can take the form of a release by the other party of the first party.

Take severance pay, for example. Many employers pay severance to terminated employees in an attempt to end an employment relationship on a positive note. However, if the terminated employee does not sign a release agreement in exchange for the severance money, then he/she can sue the employer later for alleged discrimination, unpaid wages, sexual harassment or a variety of other claims. If the employee does sign a written release agreement in exchange for severance money, then the employee has agreed to release any potential claims s/he had against the employer, and any lawsuit filed is likely to get dismissed at the outset.  (We should note that there are specific provisions that must be included in a release of employment-discrimination claims.)

Another example is the situation where a company has a dispute with a vendor.  Let’s say the vendor claims that the company owes it $10,000.00.  The company disputes that amount and says that it only owes the vendor $4,000.00.  The company then tells the vendor that it will pay the vendor $4,000.00 and wants to end the dispute.  The vendor could agree, take the company’s $4,000.00 and then sue the company for the balance.  But, if the company gets the vendor to sign a written release agreement in exchange for the $4,000.00 payment, then the vendor cannot later sue the company for the balance.  And if the vendor does sue the company, the vendor’s case is likely to get dismissed at the outset and the company sued  may be able to collect the attorneys’ fees incurred in the defense.

Your goal is to protect your business or yourself.  One way to do that is to negotiate written release agreements when you are involved in a dispute that could end up in court someday.

If you are asked to sign the release as the party releasing your claims, the language of the release is pivotal. Many times it is too broad and goes beyond the matter at hand, releases parties that should not be released, or should be a mutual release where each party releases the other. Sometimes individuals agree to release without having a firm understanding of their legal rights and what they would be giving up by the release. This should be reviewed by your attorney as it involves a significant yielding of your rights.

At Hymson Goldstein Pantiliat & Lohr, PLLC we have experienced attorneys who can help you draft/review written release agreements to help protect your business from future lawsuits.

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