Release

A release is a contractual or unilateral relinquishment of a known claim against another party. Releases are foundational to settlement practice, most settlements include a release of the underlying claims, often coupled with mutual releases of all claims between the parties. The scope of a release is determined by its language; sophisticated commercial parties are generally bound to the terms they sign, even if the release covers more than was specifically negotiated.

Types of releases

Common release structures: (1) specific release, releases identified claims (e.g., "all claims arising out of the lease dated [date]"); narrowest in scope; (2) broad release, releases all claims, known and unknown, between the parties as of the release date; (3) mutual release, both parties release each other; standard in commercial settlements; (4) unilateral release, only one party releases; common where consideration runs one way (employee severance, loan workout); (5) general release, all claims of every kind, often with broad "including but not limited to" language. The scope of release language is heavily negotiated and often decisive in subsequent disputes.

The Schlumberger framework, disclaimer of reliance

Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997), addressed the enforceability of releases against fraud and mutual-mistake claims. The Texas Supreme Court held that a release with a disclaimer of reliance, language stating that the releasing party did not rely on representations of the other side, can defeat fraudulent-inducement claims. Italian Cowboy Partners (Tex. 2011) refined the framework: the disclaimer must be (1) clear and unambiguous; (2) freely negotiated by sophisticated parties; (3) not against public policy. Sophisticated commercial releases routinely include disclaimer-of-reliance language to defeat post-release fraud claims.

Release of unknown claims

Standard release language often refers to "claims known and unknown", but Texas courts apply heightened scrutiny to releases of truly unknown claims. Memorial Med. Ctr. of E. Texas v. Keszler (Tex. 1997) requires that releases of unknown claims be expressly stated. Boilerplate "all claims" language may not cover claims that were unknown at release execution if the language is ambiguous. Best practice: specifically reference unknown claims with words like "whether known or unknown, foreseen or unforeseen, suspected or unsuspected", this language has been held effective.

Statutory limits, DTPA waiver bar

Section 17.42 of the Business and Commerce Code makes consumer waivers of DTPA rights "contrary to public policy and unenforceable" except in narrow circumstances. The DTPA waiver bar significantly limits the use of releases in consumer transactions. Three exceptions in § 17.42: (1) consumer not in disparate bargaining position; (2) advised by counsel; (3) knowing waiver in writing. The exceptions are narrow; consumer releases of DTPA claims should be drafted carefully with the § 17.42 exceptions in mind.

Other public policy limits

Texas courts decline to enforce releases of: (1) future intentional torts, generally void as against public policy; (2) statutory rights with anti-waiver provisions, DTPA, certain employment statutes, securities laws; (3) fraud in the execution of the release itself, the release was procured by fraud about its content; (4) release procured by duress. Most other releases are enforceable per their terms among sophisticated parties.

Common drafting pitfalls

Frequent release-drafting failures: (1) scope ambiguity, unclear what claims are covered, leading to litigation over scope; (2) missing affiliated parties, release covers only signatory but not affiliates, parent, subsidiaries, employees; (3) missing future claims, release covers existing claims but not claims arising from same circumstances; (4) missing third parties, release covers parties but not third parties who may sue (employees, customers); (5) no disclaimer of reliance, exposing release to fraud-claim attack; (6) missing severability, entire release void if one provision is unenforceable.

Enforcement and challenges

Common challenges to releases: (1) fraud in inducement, release procured through misrepresentation (defeated by Schlumberger disclaimer when properly drafted); (2) mutual mistake, both parties operated under the same factual misunderstanding; (3) unconscionability, release terms or process so unfair as to be void; (4) scope challenge, claim falls outside the release language; (5) capacity, releasor lacked authority or capacity; (6) consideration, release given without consideration. Most challenges fail when the release was negotiated by sophisticated parties with counsel.