Release of claims: Overview, definition, and example
What is release of claims?
A release of claims is a legal agreement or provision in which one party agrees to relinquish or waive any legal rights to pursue claims or lawsuits against another party. By signing a release of claims, the party agreeing to release waives any potential claims, whether known or unknown, that they may have against the other party at the time of the release. This is often used in settlements, contracts, or as part of an agreement to resolve disputes without further legal action.
For example, when an employee leaves a company, the employee might sign a release of claims as part of their severance agreement, stating they will not pursue any legal action related to their employment.
Why is release of claims important?
A release of claims is important because it provides certainty and finality to parties involved in a dispute or settlement. It helps prevent future legal claims or actions from being brought by one party against another, allowing businesses to move forward without the risk of unresolved disputes resurfacing. For businesses, obtaining a release of claims can provide protection from future lawsuits and claims that may arise from prior actions or relationships.
For individuals, releasing claims helps ensure that any disputes or grievances are resolved completely and that they will not take further legal action on those matters in the future.
Understanding release of claims through an example
Imagine a business enters into a settlement agreement with a former employee who claims wrongful termination. As part of the settlement, the employee agrees to a release of claims, meaning they will not file any further lawsuits related to the termination. In exchange, the business agrees to pay the employee severance or another agreed-upon compensation. This release prevents the employee from suing the company again over the same issue.
In another example, a company that sells a product may require customers to sign a release of claims before receiving a refund, ensuring that the customer cannot pursue future legal claims related to the product’s performance after accepting the refund.
An example of a release of claims clause
Here’s how a release of claims clause might look in a contract:
“Upon receipt of the settlement payment, the Employee hereby releases and forever discharges the Employer, its agents, affiliates, and subsidiaries from any and all claims, demands, or causes of action, whether known or unknown, that arise out of or relate to the Employee’s employment, including but not limited to claims for wrongful termination, discrimination, or breach of contract.”
Conclusion
A release of claims is a critical legal tool for settling disputes, closing out claims, and preventing future litigation. It provides closure for both parties, ensuring that no further legal actions can be taken regarding the matters covered by the release.
For businesses, incorporating release of claims provisions into contracts, settlements, or agreements can provide valuable protection against potential lawsuits, helping to ensure that disputes are resolved once and for all.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.