Articles > Contracts

What is a Deed of Release?

May 19, 2021   Dean WolmanPhilip Evangelou

A deed of release is a legally binding document formed between two parties that brings a resolution to a dispute or ends an agreement between the parties. To simplify this definition, the term ‘release’ is essentially a discharge of obligations. 

A Deed of Release need not discharge both parties from their obligations. Instead, it may outline that only one party to the deed is discharged from their obligations or liabilities.  

This article will detail the benefits and risks of these agreements as well as outlining the signatory process this form of document entails. 

How can a Deed of Release be of benefit to you? 

A deed of release is used to resolve a dispute or end an agreement between two parties. Using a deed of release is advantageous due to it being less stressful, more efficient and cheaper compared to other forms of dispute resolution. 

After signing and entering into the agreement, neither party can continue the dispute or the agreement.

After resolving a dispute, it is essential that one of the parties initiates a deed of release to ensure that the other party cannot initiate legal proceedings against you. 

Deeds of release are specifically beneficial to employers. Depending on the circumstances, employees may depart a business in an uncivil manner. Because of this, employers risk the possibility that their ex-employee may initiate employment claims against them.Therefore, ensuring that a departing employee signs a deed of release will protect the employer from facing any legal proceedings once the employee has left. 

Deeds of release are extremely beneficial to both employees and employers as they ensure certainty, confidentiality and clarity when ending an agreement or resolving a dispute. 

What are the Risks involved in signing a Deed of Release?

Whilst a deed of release can be of great assistance in providing clarity and certainty when resolving a dispute or ending an agreement, signing this legal document also has its risks. 

Part of the risk involved in signing a Deed of Release is the relinquishment of your rights. For example, signing a Deed of Release can prevent both parties from claiming against one another in future circumstances. Additionally, signing a deed of release does not prevent an employee from accessing their statutory rights such as superannuation and worker’s compensation claims. 

It is also essential that the terms within a Deed are clear and relevant, to ensure no further disputes in the future result due to a lack of clarity and certainty as to what the parties agreed upon. 

Must both parties agree to a Deed of Release?

A common feature of a Deed of Release is a mutual release. A mutual release is an agreement between both parties to discharge each other from obligations. This may include releasing each other from any:

  • debts;
  • demands;
  • future claims. 

How do you Sign a Deed of Release?

To ensure a valid and legally binding Deed of Release, there are a number of requirements that both parties must satisfy, to properly sign and execute the document. 

To ensure the Deed of Release is legally enforceable you need:

  • Someone who is not a party to the deed as a witness to the signature of both parties.
  • To ensure that the terms of the agreement are clear and certain and that both parties understand the subsequent consequences once the document is signed.
  • Both parties to agree that they will maintain confidentiality and keep the terms of the settlement confidential upon signing the Deed of Release. 
  • Companies to execute the deed with consideration of their company constitution and rules. 
  • There must be enough copies for both parties to sign. 
  • Both parties to sign all copies of the deed. 
  • Non-disparagement from both parties

What are the types of release?

There are a number of uses for Deeds of Release including:

  • Ending a personal guarantee: A deed of release is one of the only options of ending a personal guarantee and protecting oneself against personal liability. 
  • Termination of a loan or credit agreement: A deed of release enables you to end a mortgage or loan agreement. 
  • Resolving a commercial dispute: This is in relation to a deed of settlement. 
  • Relating to an Employment contract: Employers can issue a deed of release to employees as part of a dispute resolution or a redundancy/termination of contract agreement. 

What to take away from this article?

A Deed of Release is an important legal document that enables two parties to finalise a dispute resolution or end an agreement. Using a Deed of Release can protect both employees and employers respectively. It enables employers to protect themselves from further legal action after dismissing an employee and ensures certainty surrounding the termination of an employer/employee. It is important to understand the terms of the Deed in addition to the rights you are giving up, prior to signing and executing the document. 

If you need assistance with regards to drafting or reviewing a Deed of Release or you have any questions, get in touch with our commercial lawyers via the contact form or by calling 1300 337 997. 

About Dean Wolman

Dean WolmanDean is a paralegal with OpenLegal. Dean works on a range of commercial law matters including contract reviews, startup fundraising, and legal issues concerned with early stage startups.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.