Release of unknown claims: Overview, definition, and example
What is the release of unknown claims?
The release of unknown claims refers to a legal provision in which one party agrees to waive or relinquish any claims or legal rights that they are not yet aware of at the time of the agreement. This is typically included in settlement agreements or contracts to ensure that, once a dispute is resolved, the parties cannot later bring up claims that they could have raised but were unaware of at the time of the settlement or agreement. Essentially, the release prevents future legal action related to claims that were not previously known, even if those claims might arise later.
For example, if two businesses settle a dispute, one party might sign a release of unknown claims to ensure that no additional claims can be filed in the future related to the same issue, even if those claims were not apparent at the time of the settlement.
Why is the release of unknown claims important?
The release of unknown claims is important because it provides finality to legal disputes and helps prevent future lawsuits or claims that could arise from issues that were not immediately apparent. This provision offers certainty to both parties, as it ensures that once an agreement is made or a settlement is reached, no further claims can be brought up later on the same subject.
For businesses, including a release of unknown claims in settlement agreements can reduce the risk of long-term legal exposure, giving them peace of mind that all potential issues have been resolved. It also encourages quicker settlements, as parties are more willing to agree when they know that no future claims will be made.
Understanding the release of unknown claims through an example
Imagine two companies, Company A and Company B, who have been involved in a legal dispute over a contract breach. After lengthy negotiations, they agree to settle the matter for a specified amount of money. As part of the settlement, Company A signs a release of unknown claims, meaning that in the future, Company B cannot sue Company A for any other claims related to the same contract, even if new issues arise that were not discovered during the settlement discussions. This ensures that the dispute is fully resolved and prevents any future legal challenges related to the same matter.
In another scenario, an employee who has filed a wrongful termination lawsuit against their employer may agree to settle the case for a sum of money. As part of the settlement agreement, the employee may sign a release of unknown claims, preventing them from filing any future claims related to the termination, even if the employee discovers new information later that could have led to another claim.
An example of a release of unknown claims clause
Here’s how a release of unknown claims clause might appear in a settlement agreement or contract:
“The Releasing Party hereby irrevocably and unconditionally releases and discharges the Released Party from any and all claims, whether known or unknown, arising from or relating to [the subject of the dispute], including but not limited to claims that were not discovered or could not have been reasonably discovered at the time of this agreement.”
Conclusion
The release of unknown claims is a legal provision that helps ensure that once a dispute is resolved, no future legal claims can arise from the same matter, even if those claims were not known or apparent at the time of the settlement or agreement. This release offers closure to both parties and allows for greater certainty in business transactions and legal matters.
For businesses, using a release of unknown claims provision in agreements and settlements can prevent future legal exposure, reduce the likelihood of ongoing disputes, and provide peace of mind that the matter is fully resolved. Understanding this provision is crucial when negotiating settlements or contracts to ensure that all potential future claims are appropriately addressed.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.