In this blog, presented by SunRay Construction Solutions and Jessica Murphy, Counsel, Mirick, O’Connell, DeMallie & Lougee, LLP, find out in detail about what are some of the key points that you should focus on while dealing with release forms.
What are the Steps to keep in mind before Signing a Release?
Step 1: RTFC
The very first recommendation that we have for you is to always, always, read any legal document that you receive. If the language in the document is not clear, you can always ask an attorney to break it down for you. However, irrespective of whether you have received a legal document, or you are using your own documents, it is necessary that you read through it to have a good understanding of what is present in the document. So, here are the top three points for you to consider:
- Do you have all the pages? – You must ensure that your document contains all the relevant pages and that there are no pages missing.
- Are there defined terms that are used? – In most of the contracts, you will see defined terms, such as contractor, supplier, owner, etc., to identify the various parties. It is helpful to have these defined terms, especially if you are going to use the forms again and again. So, you will need to make a change in just one place.
You also need to pay attention if you have pulled the defined terms from another document or whether you are defining a term that is not used anywhere else, etc.
- Does it incorporate any documents or terms by reference? – It is completely legal to incorporate another document by reference without having it attached, such as reference to the terms of a purchase order, terms of another contract, etc. The reference is also legally binding even if you have not seen that document before you execute it, but you are still bound by its terms.
Step 2: Checklist
Here are the key items that should be on your release checklist, whether you are signing a release or asking someone else to sign one:
- Special Considerations
- Payment Terms
- Breach of Release
Let’s look at each of these items in detail.
Parties – Under parties, you need to look for:
- Full legal name and address of the parties to the contract. You can obtain this information through the Secretary of State’s website.
- All the parties who are being included in the release. Typically, the release will contain the language, “…and its agents, insurers, officers, employees, contractors, subcontractors, attorneys, predecessors, successors, heirs and assigns…”.
- Signatures and ensure that they are legible and identified with a typed name, so that it is easier to look for them if required. This also includes witnesses and notaries, although in Massachusetts, it is not required to notarize general releases. However, for a mechanics lien, a discharge document that is going to be recorded with a registry of deeds does require to be notarized.
- As an option, you can set up electronic signatures. However, if you are opting for this, then make sure that your release language says that the parties agree to have the release executed by electronic signatures.
Scope – The scope is one of the major areas where you need to focus while dealing with release forms:
- You need to check what is being released? Is it a general release or a limited release? The releases may be titled General Release, General Mutual Release, A Limited Release, etc. If you do see the word limited, then it's an indication that you need to take a closer look.
- For example, a general release may have the language, “all claims, right to relief, demands, rights to payment and legal claims between the parties, including but not limited to…” whereas a limited release may have the language, “all claims, right to relief, demands, rights to payment and legal claims between the parties arising out of Invoice 2, including but not limited to…”. So, in the limited release language, the release will be limited to only the claims that arise out of Invoice 2.
- You need to check for claims known as well as unknown. This means that at the time of executing the release, whether you knew about certain claims or not, they will be included in the release.
- Also, pay attention to the timeframe. It is always recommended to opt for a limited release timeframe.
Special Considerations – When you look at a release, check if there are any special considerations for certain subjects of the Release. For example:
- If you are trying to release a mechanics lien before a lien has been initiated, then you should be aware that it is illegal in Massachusetts to waive your rights to mechanics lien.
- If you are dealing with a recorded mechanics lien or complaint, then you need to address how the recorded lien will be handled. You also need to consider the various deadlines and special timing considerations.
- If your release includes release of bond rights or bond claims, then the best course of action is to consult an attorney who can guide you and ensure that you are protected.
- Even if you are just dealing with paperwork, you must ensure that everything is filed in a timely manner.
Payment Terms – Payment terms are another key area that you need to focus on while dealing with releases:
- Firstly, you must know who is paying, where, and how they are making the payment. Try to include the language “in good funds” just to be on the safe side. You also need to determine if you are willing to accept certified funds or wire funds. If you are on a short timeframe when dealing with your release, then the best option is to get the payment by wire.
- Next, you need to be clear about the date when somebody needs to make payment by and is it the date that they need to make payment, or the date by which you must receive payment. If you are receiving payment, then it is good to include the language, ‘we will receive it on or before a specific date’. This will put a burden on the other party to ensure that the funds are in your hands by that specific date.
- Lastly, you need to be clear on does the receipt of payment triggers the release. Now, if you are the party receiving the payment, then you obviously want to release your claims only after you have the money in your hand. But, sometimes, if there are mutual releases, then it may be that the other party is going to release their claims as soon as they sign the document.
Breach of the Release – The last thing on our checklist is to look for what happens if there is a breach of the release:
- As discussed in the previous point, you need to check if you are resolving all claims upon executing the release or upon completion of the payment. This ideally sets up two scenarios. For example:
- You have a debt of $100,000 and you have agreed to take $75,000, and you have signed a settlement agreement which has this release in it. Now, if you do not draft your release carefully, you may end up having to just accept the $75,000 even if you are not paid.
- The other scenario is that you only release the additional $25,000 and agree to release all claims only after receiving the full payment. So, in this case, if there is a breach of release, then you can still pursue the entire $100,000 unlike the first situation where you will be stuck with $75,000.
- Another thing you need to look for is what happens if a party breaches the release? Are there any alternative dispute resolution procedures that you want to put in your release?
- You also need to consider the jurisdiction and venue to litigate any breach of release. For example, if both the parties are based in different states and there is nothing specific mentioned in the contract, then in your release, put in the jurisdiction and the venue which is the state and the court where you can bring in your claims.
So, these are the key items that should be on your checklist while dealing with release forms. Make sure that you pay close attention to each of the items to protect your rights.