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 a legally binding document used to formally resolve disputes between two or more parties. It outlines the agreed terms of settlement and releases each party from future claims relating to the matter. Whether you’re a business owner, HR manager, contractor, or individual in a commercial dispute, understanding how a deed of release works can help protect your legal interests.

In this article, we’ll break down exactly what a deed of release is, the different types, when you might need one, and the key provisions to include. You’ll also learn about signing procedures, legal risks, and what happens if the deed is breached. Our goal is to simplify this complex area of law so you can make confident, informed decisions and resolve disputes effectively, without costly litigation.

What is a deed of release?

A deed of release is a formal legal document used to resolve a dispute and prevent future claims between parties. It can take the form of a unilateral release (from one party) or a mutual release (from both parties). This document outlines the agreed settlement terms, specifying the obligations each party must meet to formally end the dispute and waive their rights to take further legal action.

By signing a deed of release, one or both parties are released from any current or future claims, liabilities, or responsibilities arising from the issue in dispute. It provides legal certainty and finality, ensuring all parties understand the matter has been conclusively resolved. This makes it an essential tool in avoiding future legal disputes and protecting business or personal interests.

Why is having a deed of release important?

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

Legal Protection from Future Claims

A properly drafted deed of release safeguards your rights by clearly documenting the terms of settlement. It serves as a written agreement that protects both parties from ongoing or future legal action related to the dispute.

Reassurance that everyone is clear on the agreement

The deed ensures that everyone understands their obligations under the agreement. It outlines specific conditions that must be met, such as payment of a settlement amount, before the release becomes effective. This removes ambiguity and prevents misunderstandings down the track.

Final Release from Liability

Once all agreed-upon obligations are fulfilled, both parties are released from any potential claims or liabilities related to the dispute. This creates legal finality and reassurance. However, a deed of release will often provide a provision for the fact that the parties are not released from any action(s) with respect to the enforcement of the deed.  

Enforceable, 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. Personal Guarantee Release

Used to release a guarantor from liability under a personal guarantee, typically related to a business loan or financial obligation. This protects individuals once the debt has been repaid or renegotiated.

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. Commercial Dispute Settlement

Commonly used to resolve business disputes, such as contract breaches, unpaid invoices, or service disagreements. A deed of release ensures the matter is formally closed and prevents future claims.

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 essential when resolving disputes or finalising agreements to ensure all parties are released from future claims. It provides legal certainty and protects against further liability, making it a critical risk management tool in business and legal dealings.

Below are common situations where our clients have successfully used a deed of release:

Settling a Legal Dispute

When parties wish to resolve a dispute without litigation, a deed of release formalises the agreement and confirms that no further claims can be made. This approach often helps reduce legal costs and avoids the uncertainty of court proceedings.

End of contractual agreements

After a loan, lease, employment contract, or commercial agreement, a deed of release confirms that all terms have been fulfilled and that no outstanding obligations remain. This helps prevent future misunderstandings or claims.

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 

To ensure a deed of release is legally enforceable and protects your interests, it must include certain essential provisions. Below are the key elements and considerations when drafting a comprehensive deed:

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 Terms and Release Conditions

Detail the agreement reached between the parties and any specific conditions for the release to take effect. For example, the deed may only be valid once a settlement amount is paid or obligations are fulfilled.

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. 

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