Deed of Release

What is a Deed of Release?

A Deed of Release is for use when one or both of the Parties are going to be released from certain obligations or liabilities.

The Deed may be used to settle a dispute between the Parties, for example if an incident occurs, and both Parties believe that the other Party is at fault. Rather than taking legal action in the courts, the Parties may reach an agreement out of court, and may use this Deed to document that agreement.

For example, if there is a minor car crash, and it is somewhat unclear who was at fault, the Parties might use this Deed to record their agreement that no further legal action will be taken between them in relation to the incident. In some cases, the Parties might also agree that one Party pays something to the other Party, in addition to both Parties releasing each other from any further obligations. By reaching an agreement in this manner, both Parties may avoid a lot of stress, save on legal costs, and still reach an appropriate resolution.

This Deed of Release is designed for the resolution of civil matters between Parties. It is not intended for use for employment disputes, criminal matters, or for issues with public authorities.

What are the different types of Deed of Release?

A general Deed of Release is a general release document that can be used for a wide range of situations (aside from employment situations).

A Deed of Release may be one-way, meaning one Party is releasing another Party from certain obligations or liabilities, or mutual, when multiple Parties are simultaneously releasing each other from various obligations and liabilities. It may be used to settle a dispute between the Parties, for example if one Party is alleging that the other Party is liable to it for some reason.

By contrast, a Deed of Release for Employment is specifically designed for employment situations.

What kinds of situations can be dealt with in a Deed of Release?

A Deed of Release can be used for a wide range of situations. It effectively amounts to an agreement between two Parties, that any issues between them will be put to rest and they will not claim anything else from each other.

For example, it could be used for the following kinds of situations:

• Minor car crash - if two drivers are involved in a minor accident, and one agrees to pay for the repairs of the other one without going through insurance, a Deed of Release could be used to confirm that once payment has been made, the Parties will go their separate ways and will not claim anything further from each other.
• Settlement of a debt - if one Party (the debtor) owes money to another Party (the creditor), and the creditor agrees to accept a reduced amount as payment in full, a Deed of Release could be used to confirm that the creditor will not make any further claims for the remaining balance (provided the lesser amount is paid by the due date).
• Partnership or shareholder exit - if a partner or shareholder is leaving a company, a Deed of Release could be used to confirm what compensation they may receive, and to confirm that they will not claim anything further from the business.

There are many other situations in which a Deed of Release could be used. In general, they can help to rule a line under a matter, to prevent future disputes once a settlement has been reached.

Is it mandatory to have a Deed of Release?

No, it is not mandatory to have a Deed of Release. However, it is a good way to rule a line under the matter so that both Parties can move forward with confidence that it has been resolved.

If the Parties do not use a Deed, then it remains possible that either Party could come forward at a later date to make a claim against the other Party.

What does the term "release" mean?

In this document, the term "release" refers to being released from any further claims. If one Party (the "First Party") is releasing the other Party (the "Second Party"), then this means that the First Party agrees not to pursue any further legal claims against the Second Party. Once the Parties enter the Deed, the dispute between them will be finalised.

Therefore, in respect of a particular obligation, the Party which is "releasing" the other Party, is effectively giving up some of their legal rights. This should not be done without careful consideration. Both Parties should make sure that they understand the consequences of this. If they have any doubt, they should seek independent legal advice.

By signing a Deed of Release, the Parties do not actually have to admit any liability. In fact, a clause can be included in the Deed whereby the Parties specifically confirm that nothing in the Deed says anything about either Party's actual liability. However, within the Deed, the Parties can confirm that the Parties are released from all relevant liabilities towards each other.

What has to be done once a Deed of Release is ready?

Once the Deed has been prepared, both Parties may take a copy (before it is signed) and review it to ensure that they understand the Deed and are happy with the terms of it.

There are certain formal requirements that need to be met in order for a Deed to be validly signed. This Deed will need to be signed in accordance with those formal requirements, or it may not be legally binding. For example, for an individual to validly sign a Deed, the signature clause should read "Signed Sealed and Delivered" and they should sign it before an independent adult witness, who also provides their full name and signature.

The rules regarding the signing of Deeds by companies are set out in the Corporations Act 2001, as follows:

127 Execution of documents (including deeds) by the company itself
Executing a document without a common seal

(1) A company may execute a document without using a common seal if the document is signed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director—that director, if:
(i) the director is also the sole company secretary; or
(ii) the company does not have a company secretary.

Again, if the Parties are unsure about this, they should seek legal advice. If the Parties get this wrong, the Deed may not be legally binding.

Is it necessary to have witnesses for a Deed of Release?

For individuals or partnerships, it is generally necessary to have witnesses for a Deed to be validly signed. In many states and territories of Australia there is legislation which explicitly requires a witness. In some states and territories of Australia it is not legally mandatory, but it is still best practice to do so. Therefore, this Deed is set up to require witnesses for all individuals who sign it.

For companies that are signing the Deed under section 127 of the Corporations Act 2001 (by having the directors and/or secretary sign it) then witnesses may not be required.

What must a Deed of Release contain?

The Deed of Release should record various details, such as:

• Full names of the Parties.
• Contact details for each Party.
• Details about the relationship between the Parties (in other words, what has happened between the Parties, giving rise to the need for this Deed).
• Details of any payment or other benefit which is being provided from one Party to the other, in return for the release which this Deed provides.
• A confidentiality clause (although if confidentiality is important to the Parties, they may also consider preparing a separate Confidentiality Agreement).
• A release from further obligations.
• An acknowledgement from the Parties that matters are finalised.
• Confirmation from the Parties that they have had the opportunity to obtain legal advice.

By signing a Deed of Release, the Parties do not actually have to admit any liability. In fact, a clause can be included in the Deed whereby the Parties specifically confirm that nothing in the Deed says anything about either Party's actual liability. However, within the Deed, the Parties can confirm that the Parties are released from all relevant liabilities towards each other.

Once the Parties enter the Deed, the dispute between them will be finalised, meaning that neither Party can take any further action (in relation to the particular issue that is in dispute). This means that the Parties may be giving up some of their legal rights. Therefore, if the Parties have any concerns about this, they should seek legal advice.

Which laws are applicable to this Deed of Release?

If this Deed is being used by the Parties to release each other from certain contractual obligations, then general principles of contract law, as provided by the common law, may apply.

In addition, if the Deed is being used by the Parties to release each other from other legal obligations, for example, in connection with damage to property or personal injuries, then various other bodies of law may apply. For example, each state and territory has legislation and common law that deals with civil liability, and which may need to be considered.

Each state and territory has legislation that addresses the formalities that apply to the signing of deeds by individuals. In addition, the Corporations Act 2001 (Cth) deals with the signing of deeds by companies.

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