Broad and all-encompassing release clauses generally found in agreements in settlement of a dispute may be limited in its application depending on the circumstances and knowledge of the parties at the time the release came into existence.
Key Takeaways
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When deeds of settlement and release are entered into, they often contain clauses which broadly release the parties from any future known and unknown claims against each other.
- While release clauses are often drafted as widely as possible, their broad terms may be constrained by the subjective knowledge and intention of the releasing party. This is so when they are unaware of the obligation being released, or if they did not intend to release it, such as unforeseen circumstances.
- Accordingly, the general words of a release may not always be relied on to escape liability. Careful consideration should be had when negotiating such clauses, and it may be appropriate to draft them with a degree of specificity depending on your circumstances.
The limit of a release?
Entering into a deed of settlement and release is common when parties settle a dispute, or when proceedings settle out of Court. It is also common for parties to negotiate fairly broad release clauses, with the intention that it would absolve the party seeking to rely on such release from any and all liability with respect to known and unknown future events against a particular party. After all, release clauses are designed to protect parties from future potential claims and litigation.
However, not all circumstances are often known or within the contemplation of the parties at the time a deed of settlement and release is negotiated and entered into, and unforeseen circumstances inevitably arise. This is the very subject matter of the
The facts
The CBA and the Reids settled those proceedings and entered into a Deed of Settlement. It was a term of that Deed that the CBA would take possession of and sell a property owned by the Reids. CBA subsequently took possession of the property and entered into a sale contract with a third party. However, prior to the settlement of the sale, the property was vandalised by unknown parties and subsequently sustained substantial damage. CBA allowed the purchaser a deduction of
Issues
On appeal, the
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Findings
The Court found that the general words of a release should be read narrowly and limited by the knowledge and intention of
Further, in circumstances where the property had sustained substantial damage while in the CBA's possession, the Court found that the CBA could not rely on the general words of the release to escape liability for the damage.
The Court dismissed the CBA's application for summary judgment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Ms
ClarkeKann Lawyers
Level 4,
Fax: 28235 1299
E-mail: C.kintis@calrkekann.com.au
URL: www.clarkekann.com.au
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