What is a release?
A release is a promise from one person to another to release that person from a particular obligation to the first person.
A release is usually granted in the context of contractual obligations or to settle a contractual or other type of dispute.
Usually a release is given in return for some other type of consideration. For example, the release of a debt may arise because a party has agreed to pay a part payment or to provide something in return.
Releases are often seen in the context of a holder of a charge (similar to a mortgage) over the assets of a company. It is common to see a financier provide a partial release from a charge for the company to be able to deal with a particular asset.
As with all contractual obligations, there are many tricks and traps which must be observed when drafting a release. If a release is not properly drafted, or does not capture all of the obligations which are to be released, then the party receiving the release may face a risk of an about face later on by the party giving the release.
When drafting a release it is important to give consideration to:
- the obligations which are being released. These must be specifically stated
- what obligations are continuing? To avoid confusion obligations which are outside the release should be carefully set out
- what extent are obligations being released? It needs to be clearly stated that not only is the obligation being released, but also any action, claims or legal proceedings which may be instituted in relation to the obligation
- what formalities are required? In some cases releases must be drafted as a deed due to questions of consideration. In other cases, certain notices need to be registered with the Australian Securities and Investments Commission. There is also particular language required in certain types of release clauses
Releases are complex instruments and their drafting should not be taken lightly. Professional advice should be sought when drafting a release clause to maximise its enforceability.
For more information or assistance with providing or drafting a release, please contact one of our Corporate & Advisory lawyers for a confidential discussion.
Author: Darren Sommers
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