Understanding the Deed of Release: What You Need to Know

A Deed of Release is a legally binding agreement between two parties to settle a dispute, and is also known as a ‘Deed of Settlement’. By signing this document, you are able to release another party fully or partially from their obligations in a dispute.  Therefore, it is imperative to understand how it works and what benefits and risks are involved for a seamless dispute resolution.

Deed of Release Checklist: Do You Need One?

Let’s simplify the process for you to ascertain whether you need a Deed of Release. Here’s the checklist:

- Is there an ongoing dispute? Assess if there is a dispute or conflict with another party that requires resolution

- Is resolution sought outside of court? Check if the parties are willing to resolve the dispute outside court.

- Is a party willing to be released from obligations? Identify whether either party is willing to be fully or partially released from the dispute's obligations.

- Are you seeking a final settlement? Conclude whether you need a final settlement to avoid future claims

- Are you looking for a legally binding settlement? Determine if parties are to enter into formal and legally enforceable agreement to ensure compliance with the terms of settlement.

How Do Release Deeds Work?

I’ll illustrate this by way of an example:

While a deed of release is typically found in property, asset, and mortgage-based matters, the most common example is homebuying. Most individuals purchase their homes with the help of a mortgage provided by a financial institution. The bank providing the funds for the mortgage would then take a legal claim against the house as collateral until the loan is paid off. Meanwhile, the lender holds the title to the property and is formally a lienholder of record on the property. 

Once the borrower completes their mortgage terms and pays off the loan in full, a mortgage deed of release can be created. It reports that the loan has been satisfied under the terms required. It also states that the lien has been removed and the full title has been transferred back to the homeowner. Now, the homeowner owns the asset free and is no longer subject to any terms or obligations of the lender. The lending account is terminated.

When to use a Deed of Release?

1. Termination of mortgage or loan agreement

Akin to the scenario illustrated above, a deed of release is a written agreement between the lender and borrower that releases the borrower from all obligations and liabilities under the mortgage or loan once all the terms of the agreement have been satisfied. The deed of release confirms that the borrower has paid off the loan or mortgage in full, and that the lender no longer has any claim over the property or asset that was used as collateral.

2. Employment agreements

A deed of release is also frequently used by employers to terminate an employment agreement with an employee. By signing the deed of release, the employee agrees not to take legal action against the employer and to keep confidential any information learned during their employment, thus protecting the employer’s business interests. Another common example would be a redundancy agreement. In the event of redundancy, the employer tends to execute a deed of release to confirm any severance pay and benefits as well as to avoid any legal claims raised by the employees.

3. Ending personal guarantee

A personal guarantee is when you assume personal responsibility for a debt, even if that debt is owed by a business entity that you own. Ending a personal guarantee through a deed of release means that you are free from personal responsibility and liability.

4. Resolving a commercial dispute

To put an end to a commercial dispute, the deed of release will outline the terms of the settlement, including any compensation or other remedies agreed upon by the parties. This can provide a final and binding resolution to the dispute, giving an alternative to the costly and time-consuming litigation. 

Benefits of Deed of Release:

1. Protect yourself: By signing a deed of release, both parties gain legal protection and certainty. The releasor can ensure that they will not face any future claims or legal action from the releasee, while the releasee can move forward without the fear of litigation. 

2. Closure and Resolution: A deed of release allows parties to reach a final resolution, putting an end to the conflict and avoiding prolonged legal battles. It provides closure and allows both parties to move on with their lives or business operations. 

3. Cost reduction: By utilizing a deed of release, parties can avoid the high costs stemming from litigation, such as attorney fees, court fees, and potential damages. It offers a mutually agreed-upon solution that can often save time and money for all parties involved.

Risks Associated with Deed of Release:

Whilst a deed of release can be of great assistance in providing clarity and certainty when resolving a dispute or ending an agreement, signing this document could limit your legal rights and claims that you may have against the other party. 

Prior to agreeing upon the terms within the deed, you should be fully aware of what rights you are waiving and what would be the consequences of giving up those rights. For example, if you are settling a debt dispute by requiring a party to pay you a fixed amount of money, the deed of release will prohibit you from claiming against that party for further sums even though you believe they are owed. 

Important Terms of Deed of Release

1. Parties involved and date: The deed of release identifies the date and parties involved, namely the releasor (the party releasing the other from liability) and the releasee (the party being released). 

2. Interpretations: This section provides definitions and clarifications for terms used within the document, ensuring a clear and accurate understanding.

3. Release of Liability: The core purpose of a deed of release is to absolve one party from any legal claims or liabilities arising from the past or future actions. One example of release section is illustrated as follows: 

The Financier:
(a)    releases the Security Provider from all liability under the Security; and
(b)    releases the Secured Property from the Security and reassigns the Secured Property to the Security Provider.

In this context, the Financier, the party who provides the funds or resources, releases the Security Provider, who is the party offering the guarantee, from all liabilities under the Security, which refers to the agreement between the parties. Furthermore, the Financier also releases the Secured Property, which is the asset used as collateral, from the Security and reassigns it back to the Security Provider.

4. Third party rights: A deed of release might outline the boundaries of involvement for individuals or entities not directly participating in the deed. For example, it may state that a person who is not a party to the deed has no rights to enforce any terms of the deed. This means that only the parties directly involved in the agreement have the authority to implement or modify its terms. 

5. Confidentiality and Non-Disclosure: In some cases, a deed of release may include provisions regarding confidentiality and non-disclosure, preventing the parties from discussing or disclosing the terms of the agreement.

6. Governing Law and Jurisdiction: The deed of release specifies the governing law and jurisdiction that will govern any disputes related to the agreement.

7. Further steps: At the end, the deed outlines the necessary actions the Financier must undertake following the agreement. For example, the Financier may be required to return all title documents pertaining to the Secured Property to the Security Provider and carry out any reasonable requests made by the Security Provider to inform any relevant authority about the implications of this deed. It signifies the Financier's commitment to facilitate the execution and completion of the Deed of Release.

8. No admission of Liability: This clause states that the act of entering into the deed or agreement should not be seen as an admission of liability, fault, or wrongdoing by any party. To put in another way, while parties agree to resolve the dispute and release each other from further claims, they do not acknowledge any fault or liability for the issues leading to the dispute. The purpose of incorporating this clause is to prevent the deed from being used as evidence of liability in any potential future legal proceedings.

9. Conditions Precedent: A condition precedent is certain conditions or events that must take place before the Deed becomes effective or before certain obligations under the Deed are triggered. In other words, these are prerequisites that must be fulfilled for the Deed of Release to take effect. These could include, for instance, a party making a certain payment, delivering certain documents, or any other obligation that must be performed. If these conditions are not met, the parties may not be required to perform their respective obligations under the Deed of Release and the deed may be terminated.

Partial deed of release

You may find a partial deed of release clause in the release deed document. This clause allows a mortgagee to release a designated amount of funds in exchange for a fixed amount of funds by the mortgagor, which is typically used in construction loans. In short, when a borrower pays a certain amount, the creditor releases some portion of the collateral. 

Consequences of Breaching a Deed of Release

When a party breaches a deed of release, they may face various consequences, including:

1. Damages: The innocent party may be entitled to seek damages or financial compensation for any losses suffered as a result of the breach. 

2. Injunctive Relief: In some cases, the innocent party may seek injunctive relief, such as a court order to prevent further breaches or protect specific certain rights or property. 

3. Specific Performance: If the breach involves a failure to perform a specific obligation, the innocent party may seek a court order for specific performance, compelling the breaching party to fulfil their obligations as outlined in the deed. 

4. Termination: Depending on the severity of the breach, the innocent party may have the right to terminate the construction contract or seek other remedies as specified in the deed of release.

Frequently Asked Questions

1. How long is a Deed of Release valid?

A Deed of Release is generally valid indefinitely once it has been properly executed unless it is revoked or superseded by a newer agreement as Andrew Pickett, lead Trial Attorney at Andrew Pickett Law explains. It does not typically have an expiry date. The obligations and releases specified in the deed remain effective until all terms and conditions outlined in the deed have been fulfilled. However, the specific duration can also depend on the terms and conditions stipulated within the deed itself.

2. Can a Deed of Release be revoked or altered?

A Deed of Release, once executed, is legally binding and generally cannot be revoked or altered unilaterally. Any changes or revocation would usually require the consent of all parties involved. Yet, the parties involved in the deed do have the right to file a suit in a court of law to cancel it, but it will only be considered if the deed was signed under coercion, undue influence, misrepresentation, abused negotiations or fraud, as Ben Michael, Attorney, Michael & Associates emphasizes. Also, if a mistake was made in the deed, a court may potentially set it aside.

3. What are some common mistakes to avoid when drafting a Deed of Release?

John Truong, the managing director at Alliance Compensation & Litigation Lawyers gives several examples to avoid when drafting a Deed of Release including unclear language leading to ambiguity, inaccurately defining the involved parties or essential terms of the settlement. More common mistakes range from not considering all potential claims, neglecting to seek legal advice to ignoring confidentiality requirements, invalid correspondence of laws in execution of the deed.

4. What is the difference between a Deed of Release and a Settlement Agreement?

A Settlement Agreement is a legal contract used to resolve ongoing disputes between parties who aim to avoid or conclude litigation. The parties agree to meet certain conditions, often involving a compromise, to settle the dispute. This agreement is typically entered into when a dispute is still active and the parties want to avoid further legal action. 

In contrast, a Deed of Release is used once a dispute has been resolved. It's a binding document that prevents any future claims on the same matter. One party agrees to relinquish all claims against the other in return for a specified compensation or other consideration. Unlike a contract, a deed doesn't require consideration from both parties to be enforceable. It provides a more definitive resolution to disputes and is generally more challenging to overturn in court than a Settlement Agreement.

According to Mike, an attorney at Schmidt & Clark LLP, it's crucial to distinguish between a Deed of Release and a Settlement Agreement. A Deed of Release releases one or more parties from specific claims or liabilities associated with a particular event or dispute. Its primary purpose is to formally discharge any present or future obligations arising from the specified matter. In contrast, a Settlement Agreement is a more extensive contract designed to settle disputes between parties. It outlines the terms and conditions for resolving the issue, which can encompass financial settlements, actions, or other considerations.

Additionally, he emphasizes that a Deed of Release is frequently incorporated as part of a Settlement Agreement to ensure that the involved parties are released from any further claims related to the resolved matter.

Conclusion

When it comes to resolving disputes and ending agreements in relation to property ownership, a deed of release is the fundamental legal document that achieves this aim. Prior to signing any agreement like the deed of release, it's crucial to seek legal advice from a lawyer so as to guarantee your rights are completely safeguarded.

Our DocPro Templates:

The Deed of Release (Full Release) – Security Provider is a legal document that serves to release the security provider from all liability under the security agreement and reassign the secured property to the security provider. Read more at: https://docpro.com/doc20/deed-of-release-full-release-security-provider

Deed of Release (Partial Release) - Security Provider Read more at: https://docpro.com/doc22/deed-of-release-partial-release-security-provider

Deed of Release (Full Release) - Financier is a legal document that the financier release the security provider from all liability and reassign the secured property to the security provider.  Read more at: https://docpro.com/doc21/deed-of-release-full-release-financier

Deed of Release (Partial Release) - Financier Read more at: https://docpro.com/doc23/deed-of-release-partial-release-financier

Deed of Release (Full Release) - Sale and Purchase of Company serves as a supplemental agreement to a trust deed, which aims to release and discharge the Chargor from any and all liability in respect of the principal amount of the existing stocks and interest thereon, as well as all other moneys intended to be secured by the trust deed. Read more at: https://docpro.com/doc519/deed-of-release-full-release-sale-and-purchase-of-company

Please note that this is a general summary of the position under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may wish to consult your lawyer.