THE SIGNIFICANCE OF LEGAL RELEASES
By Attorney Robert A. Mich
January, 2013
By Attorney Robert A. Mich
January, 2013
Disclaimer: The information contained on this page is not legal advice. The information provided on this website is for general informational purposes and is not necessarily updated to account for changes in the law. You should consult with an attorney for legal advice regarding your individual circumstances.
In spite of their best efforts, design professionals sometimes make mistakes which result in claims being asserted against them. When a claim arises, it will typically be resolved either in a settlement prior to bringing a legal action, or through a judgment or award issued in litigation or arbitration. Under the legal doctrine of “claim preclusion,” a party is typically barred from bringing additional claims on the same legal matter once it has been tried in court or arbitration. Thus, in those cases a release is typically not necessary because the court judgment or arbitration award produces the same result.
However, when parties agree to settle their claims, a release should be carefully tailored to address the particular needs of the design professional’s situation. The release should be drafted as clearly and unambiguously as possible to ensure that it will be enforceable against claims filed in the future. The release should clearly identify all parties who have the potential to bring a claim in the future against the design professional, which may include individuals, corporate entities, and insurance carriers with whom the design professional did not contract directly. Full legal names should be expressly identified. If a release relates to a particular project, the project should be identified as detailed as possible, including references to contracts on the project, where appropriate. The release should also identify the “consideration,” i.e., the payment or other thing of value, being exchanged for the release of liability.
Releases vary in scope. Wherever possible, the releasing party should provide a general waiver of all claims of any kind between the parties to ensure that all disputes between the parties are resolved. Such a release may include not only known but unknown claims, as well. However, where a party is unwilling to grant a general release because of a concern of latent defects on a project, a release may be limited to the particular damages incurred to that point or some other known measurable estimate. The precise language used in the release is critical in light of the general presumption that ambiguities will be interpreted against the person who drafted the document.
While lien waivers are customarily provided over the course of a project, the legal significance of a lien waiver differs from that of a release. A lien waiver precludes a contractor from filing a lien claim against the property subject to the lien for the amount identified in the waiver. However, a contractor issuing a lien waiver may not be barred from pursuing a separate claim for delay damages or other damages which they may attribute to an error or omission by a design professional. This critical distinction is why a release should be sought in all cases where there is a concern about a potential claim.
Because of the many legal issues which may arise from releases, design professionals are encouraged to consult with their attorney in the drafting and negotiating of releases.
However, when parties agree to settle their claims, a release should be carefully tailored to address the particular needs of the design professional’s situation. The release should be drafted as clearly and unambiguously as possible to ensure that it will be enforceable against claims filed in the future. The release should clearly identify all parties who have the potential to bring a claim in the future against the design professional, which may include individuals, corporate entities, and insurance carriers with whom the design professional did not contract directly. Full legal names should be expressly identified. If a release relates to a particular project, the project should be identified as detailed as possible, including references to contracts on the project, where appropriate. The release should also identify the “consideration,” i.e., the payment or other thing of value, being exchanged for the release of liability.
Releases vary in scope. Wherever possible, the releasing party should provide a general waiver of all claims of any kind between the parties to ensure that all disputes between the parties are resolved. Such a release may include not only known but unknown claims, as well. However, where a party is unwilling to grant a general release because of a concern of latent defects on a project, a release may be limited to the particular damages incurred to that point or some other known measurable estimate. The precise language used in the release is critical in light of the general presumption that ambiguities will be interpreted against the person who drafted the document.
While lien waivers are customarily provided over the course of a project, the legal significance of a lien waiver differs from that of a release. A lien waiver precludes a contractor from filing a lien claim against the property subject to the lien for the amount identified in the waiver. However, a contractor issuing a lien waiver may not be barred from pursuing a separate claim for delay damages or other damages which they may attribute to an error or omission by a design professional. This critical distinction is why a release should be sought in all cases where there is a concern about a potential claim.
Because of the many legal issues which may arise from releases, design professionals are encouraged to consult with their attorney in the drafting and negotiating of releases.