Deed of Release: Types, Key Provisions and Legal Considerations

Authors: Ian Aldridge & Zeinab Farhat, Progressive Legal

A deed of release (also known as a deed of settlement and release), is an important document that comes into play when two or more parties are trying to resolve a dispute. It essentially formalises any agreements reached between them and outlines any conditions for releasing each other from potential claims later down the track.

In this article we’ll discuss what a deed of release is, its types, when it’s needed, key provisions, signing procedures, risks, and breach consequences. Our goal is to make this complex topic easy to understand so you can make informed decisions regarding any disputes that may arise, including considering how best to settle those disputes.

What is a deed of release?

Put simply, a deed of release is a formal document used to settle a dispute. Such deeds can include unilateral releases or mutual releases. It formalises the settlement agreement by outlining the terms and conditions that both parties must meet in order to conclude the dispute and waive their right to sue. 

It also relieves one or both parties from any claims, responsibilities, or liabilities originating from the dispute. A deed of release is critical for avoiding future legal problems in relation to a specific matter and making sure that all parties concerned realise that the subject has been resolved indefinitely. 

Why is having a deed of release important?

Having a deed of release in place is important for several reasons: 

It legally protects you

Obtaining a deed of release is critical to safeguard your legal rights. The deed acts as a written record of the agreement, offering legal protection and clarity to both parties. 

Reassurance that everyone is clear on the agreement

Essentially, the document guarantees that all parties involved are completely aware of the conditions of the agreement by specifying the particular obligations that each party must meet for the release to be effective. For example, a deed of release may provide that a release is not effective unless a settlement sum is paid 

Parties are released from liability

Upon fulfilling the specified obligations, the parties are released from any potential liability or claims related to the dispute in question. This finalises the resolution and grants peace of mind to all parties involved. However, a deed of release will often provide provision for the fact that the parties are not released from any action(s) with respect to the enforcement of the deed.  

Legally binding agreement

A deed of release is a legally binding agreement. Once signed, its terms are final, and there is no recourse for legal action with respect to any claims arising from the dispute unless a party breaches a provision outlined in the deed. 

What are some types of releases?

A deed of release can be used in various scenarios. Here are some common types:

1. Ending a personal guarantee

This type of release is used to free a guarantor from their obligations under a personal guarantee, often related to loans or business debts.

2. Termination of a loan or credit agreement

When a loan or credit agreement is paid off or otherwise terminated, a deed of release can be used to formally acknowledge that the borrower is no longer liable for the debt.

3. Resolving a commercial dispute

In business, disputes can arise over contracts, services, or goods. Most commonly, a deed of release will be used to resolve a breach of contract or settlement of an outstanding debt

4. Employment contracts

Employers and employees may use a deed of release when terminating an employment contract, ensuring that neither party can make future claims related to the employment.

5. Mutual release

In some cases, both parties may have claims against each other. A mutual release is a type of deed of release where both parties agree to release each other from all claims.  

This ensures that neither party can pursue any further legal action regarding the matter at hand. 

When would you need to enter into a deed of release? 

A deed of release is necessary in various situations to ensure that disputes are resolved conclusively and that there is no room for future claims.  

Here are some scenarios we regularly come across and have successfully advised our clients on: 

Settlement of disputes

When parties wish to settle a legal dispute without commencing proceedings, a deed of release formalises the agreement and ensures no further claims are made. To that end, the deed can also assist in reducing legal costs by preventing the need to resort to litigation.  

End of contractual agreements

When a contract ends, whether a loan, lease, or employment contract, a deed of release can confirm that all obligations have been met and no further claims can be made. 

Sale of business

During the sale of a business, a deed of release can ensure that the seller is released from any future claims related to the business. 

Key provisions to include in a deed of release and other important considerations 

When drafting a deed of release, several key provisions should be included to ensure it is comprehensive and legally enforceable:

1. Defining the dispute

Clearly define the dispute that led to the deed of release. This definition serves as the foundation for the document, ensuring that all releases and restrictions cover the relevant aspects of the dispute.  

Include allegations made by each party against the other and their denials. A specific definition enhances completeness.

2. Agreement and conditions

Explicitly outline the agreement reached between the parties and the conditions for releasing each other. Specify that the releases will only become effective once all obligations are met.

3. Release clauses

State that each party releases the other, as well as their servants and associates, from all claims, actions, and causes of action related to the dispute.  

This release does not exempt parties from enforcing the deed’s terms in case of a breach.

4. Covenant not to sue and bar to proceedings

Include provisions regarding a covenant not to sue and a bar to proceedings.  

This ensures that both parties agree not to initiate legal actions against each other, except for claims related to enforcing the deed’s terms.

5. Confidentiality and non-disparagement

Include confidentiality provisions to safeguard the confidentiality of the deed’s terms. Parties should commit to keeping the details confidential and refrain from sharing them with third parties.  

A non-disparagement clause can prevent negative comments about each other, preserving reputations in the market.

6. Obligations compliance

After the deed is signed, follow up with the other party to confirm they’ve fulfilled their obligations.  

Request written confirmation and supporting documentation. Set calendar reminders for timely follow-ups, especially if the deed imposes deadlines for obligation fulfillment.

7. Ongoing obligations

Both parties must remain mindful of ongoing obligations outlined in the deed, such as confidentiality.  

Details contained in the deed should remain confidential between the parties, with limited exceptions as permitted under the deed, typically for legal or regulatory requirements.

8. Consideration

Include the consideration (payment or other forms of compensation) for the release, if any.

10. Governing law

Specify that the deed of release is governed by the laws of Australia, or more specifically, the relevant state or territory.

10. Execution

Include a section on how the deed will be executed, including signatures of all parties and witnesses.

How to sign a deed of release and make It legally enforceable 

For a deed of release to be legally enforceable, it must be properly executed. Here are the steps: 

1. The deed of release must be in writing. 
2. All parties involved must sign the document. This includes the person giving the release and the person receiving it. 
3. Signatures must be witnessed by an independent party to ensure validity. 
4. The signed deed must be delivered to the party being released. 
5. Each party should retain a copy of the signed document for their records. 

What are the risks of signing a deed of release? 

While a deed of release can provide clarity and finality, there are risks involved: 

Waiving rights

By signing a deed of release, you may be waiving your right to make future claims. This is why it’s crucial to ensure you understand what rights you are giving up. 

Enforceability

Something else to consider is that if not properly drafted or executed, the deed may be unenforceable. This leaves parties open to future disputes. This is why it could be a deal breaker if you don’t have an experienced disputes lawyer draft your deed of release.  

Confidentiality breach

If confidentiality clauses are breached, it could lead to further legal action. Again, a lawyer will be able to ensure confidentiality obligations prescribed under the deed are met.  

Coercion or duress

It’s also important to ensure that the release is signed voluntarily. Any signs of coercion or duress could render the deed invalid. 

What happens if there’s a breach of the deed of release?

If a party breaches the terms of a deed of release, the other party may take legal action to enforce the deed. This can include seeking damages for any losses incurred due to the breach or obtaining a court order to compel compliance with the deed’s terms.

Key Takeaways

A deed of release is a vital document for resolving disputes and ending agreements in a business context. By understanding its purpose, key provisions, and risks, you can use it effectively to protect your business interests. 

Always consider seeking legal advice when drafting or signing a deed of release to ensure it meets all legal requirements and fully protects your rights. 

At Progressive Legal, our experienced dispute resolution lawyers specialise in providing tailored legal advice on deeds of release and other business agreements. 

Contact us today on 1800 820 083 or make an online enquiry below to ensure your business is protected and your legal documents are airtight. 

Need Dispute Resolution Advice?

Please get in touch with us today via phone or the contact form on this page.

1800 820 083