Description

Release Agreement

Summary

This Release Agreement is a generic form of a stand-alone release agreement that can be used when parties either:

• Have entered into a termination agreement but desire to execute and deliver releases at a future date.
• Desire to exchange releases when a commercial contract (or a portion of it) expires or is terminated without entering into a termination agreement.

When a commercial contract is expiring or is terminated early, the parties sometimes enter into a termination agreement to:

• Settle actual or potential claims.
• Tie up loose ends.

In many of these situations, it is likely that one or both of the parties:

• Has claimed one or more breaches by the other party.
• Is concerned that the facts and circumstances leading to termination may give rise to a breach claim by the opposing party.

Details

Therefore, when entering into a termination agreement, contracting parties often include a release of claims in the termination agreement. However, sometimes, the termination agreement contains:

• A specified future termination date (i.e., the last day of the month or the end of the contract year).
• Conditions to effectiveness of termination (for example, payment of a termination fee or one or more obligations that has not been satisfied when the termination agreement is executed).

When termination does not become effective until a future date, the parties are unlikely to execute and deliver a release that is effective before termination. Instead, they commonly agree to:

• Execute and deliver releases on the future termination date.
• Condition the effectiveness of the release included in the termination agreement on the satisfaction of specified conditions or covenants (such as delivery of a termination payment).

Before using a conditional release, the parties should consider whether the conditional release is enforceable under applicable state law. In states where a conditional release is not enforceable, instead of making the release conditional, the parties often require execution and delivery of the release concurrently with the performance of the requisite obligations.

Assumptions

This Agreement assumes that:

• The parties use these terms in a business-to-business transaction. Parties should not use this Agreement in a consumer contract. Consumer contracts may involve legal and regulatory requirements and practical considerations that are beyond the scope of this resource.
• There are two parties to the underlying agreement and both are legal entities. The parties must make adjustments if (i) either contracting party is an individual person; or (ii) there are more than two parties to the release agreement.
• The parties give releases in connection with the termination of a contractual arrangement. Parties can use this release agreement when a contract is expiring. Parties can also use this release agreement if they wish to terminate a contract, or the parties decide to execute and deliver mutual releases to the underlying contract.
• The release agreement is limited to certain key terms. This Agreement does not include certain terms that are commonly included in a termination agreement. For example, operative termination language and modifications to surviving provisions of the underlying agreement. If the parties desire to address these and other terms, they should instead consider entering into a dedicated termination agreement.
• The parties to the agreement are US entities and the transaction takes place in the US. If any party organizes in, operates in, or any part of the transaction takes place in a foreign jurisdiction, the parties may need to modify terms to comply with applicable laws in the relevant foreign jurisdiction.
• These terms are not industry or transaction-specific. This Agreement does not account for any industry-specific or transaction-specific laws, rules, or regulations that may apply to certain transactions, products, or services.

Defined Terms

This Agreement assumes that the parties have outlined certain defined terms included in optional or alternative language selections (such as Affiliates, Law, Person and Representatives) in either the termination agreement or the underlying contract. If used, conform them to the defined terms used in the appropriate agreement.