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Drafting a Release: Involves Preparing a Document to Embody Settlement Terms Including Finality
Question: What are the key components to consider when drafting a Release document in a legal settlement?
Answer: A Release document should clearly outline the terms and conditions of the agreement reached, including payment details, non-admission of liability, and any confidentiality clauses that were negotiated. Choosing United Legal Services Professional Corporation ensures that your Release is crafted with precision, protecting your interests while adhering to legal standards.
Common Clauses Within a Release and Necessity to Negotiate Certain Terms
When the parties to a legal dispute agree to resolve the matter prior to an adjudicative decision, there is an implied expectation that a finalizing release agreement will be prepared and executed (signed). Generally, a Release document will be prepared by the settling party, and the terms embodied within will provide the terms by which the dispute was resolved, such as monetary compensation as well as conduct expectations.
Promise of Release
Implied Upon Settling
When negotiating a settlement to a legal dispute, it is implied, and there expected to go without necessarily saying, that a Release document embodying the terms and conditions of the settlement will be executed. The expectation that a Release will be drafted and signed was stated within, among other cases, Bouzanis v. Greenwood et al., 2022 ONSC 5262, OZ Optics Limited v. Timbercon, Inc., 2013 ONSC 6439, as well as Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., 1995 CanLII 10638, wherein each case it was respectively said:
[10] It is well established that the delivery of a full and final release, in customary form, whose terms give effect to common sense and normal business practice, is an implied term of the settlement of an action unless the parties agree otherwise: see Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (Gen. Div.), at para. 24, aff’d [1995] O.J. No. 3773 (C.A.); Ferron v. Avotus Corp., 2005 CanLII 29655 (ON SC), 45 C.C.E.L. (3d) 226, (Ont. Sup. Ct.), at para. 26, aff’d 2007 ONCA 73, 55 C.C.E.L. (3d) 177; Hodaie v. RBC Dominion Securities, 2012 ONCA 796, at para. 3; Ahmed v. Shang, 2016 ONSC 4794, 58 C.C.L.I. (5th) 133, at para. 35.
[8] The case law is clear that where a settlement is reached, it is normally implied that an executed final release will be provided. This principle was well stated by Chapnik J. of this court in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721, where at para. 24 the decision states:
It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. This principle accords with common sense and normal business practice.
[9] I am not persuaded that there was ever any express agreement not to furnish a release. That is evidenced by the fact that there were ongoing negotiations about the wording of that release over a period of several months. The issue is then which of the release documents, if either, reflects the agreement reached by the parties.
24 It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. This principle accords with common sense and normal business practice.
Drafting the Release
Memorializing Settlement Negotiations
A Release serves the purpose of contractually memorializing the terms that were agreed to within a settlement negotiation as well as confirming a finalization of the legal issues. A Release document will, generally, contain and reiterate the terms negotiated as well as the payment of monies, if any, or promises of conduct, if any, including supplemental terms, if any, such as a non-admission of liability clause as well as a non-disclosure and confidentiality clause, and ultimately to confirm finality to the issues in dispute..
A finality clause is used to confirm the expectation that the disputed legal issues are fully resolved and a finality clause, if appropriately drafted, will obligate the releasing party to forgo any further proceedings that may, directly or indirectly, involve the released party. Essentially, a finality clause provides the released party the assurance that the releasing party will refrain from initiating or continuing legal processes that would bring the released party back to the table whereas upon settling the matter, the released party bought peace from the providing any attention or concern for the issues within the dispute.
Avoid Imposed Terms
Conditions Require Negotiation
As above, common within a Release are clauses relating to a non-admission of liability as well as a non-disclosure or confidentiality; however, although these are common clauses, these commonly used clauses must be negotiated as a term of the settlement rather than being a presumed expectation. If a party to a dispute fails to negotiate a non-admission of liability clause or a non-disclosure and confidentiality clause, and then subsequently demands the inclusion of such clauses, the law treats such demands as an attempt to alter the terms of the previously negotiated settlement agreement. The requirement to negotiate a non-admission of liability clause as well as a non-disclosure and confidentiality clause, was explained within the cases of, among others, Bouzanis, supra, Dube v. Shooman, 2013 ONSC 4348, and Abouchar v. Conseil scolaire de langue française d'Ottawa-Carleton - Section publique, 2002 CanLII 49423, wherein such cases it was said:
[16] During argument counsel for the moving parties made two additional submissions not raised in the factum. First, it was argued that, in 2022, the inclusion of a confidentiality clause could be a standard term in a release. Second, it was argued that the inclusion of the confidentiality clause in the release is of no real import because it was not complained about at the time the release was provided.
[17] Dealing with the first argument – whether a confidentiality clause should now be considered a standard term of settlement – the caselaw does not support this position. In Gilles Dube Investments Inc. v. Shooman (c.o.b. Fast Lube), 2013 ONSC 4348, Metivier J. was asked to determine whether a confidentiality clause was a standard term of an agreement. In rejecting this proposition, the court held at paras. 10 and 11:
I agree with the reasoning in Abouchar c. Ottawa-Carleton (Conseil scolaire de langue française section publique) (2002), 2002 CanLII 49423 (ON SC), 58 O.R. (3d) 675 (Eng.) (Ont. S.C.J.). As in that case, the parties here never discussed a non-disclosure clause before the offer to settle was accepted. There was no breach or repudiation of either the spirit of the terms of the concluded settlement. See also Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (Ont. Gen. Div.).
In the text The Law of Releases in Canada, Fred D. Cass, Canada Law Book, page 65, the author notes:
...the prudent course for a party seeking confidentiality is to bargain for it as part of the process of reaching an agreement.
[18] More recently, Abouchar was followed in Terranata Winston Churchill Inc. v. Teti Transport Ltd., 2020 ONSC 7577, 16 C.L.R. (5th) 315. Vella J. found that a confidentiality clause did not form part of a standard general release. His reasoning is set out at paras. 31-32 and 44-46:
General Principles for Implied Release Terms
When the parties have agreed that a release will be executed, but the settlement agreement is silent as to the content of the release, the court will imply that the parties agreed to sign a standard form general release consistent with the settlement - nothing more and nothing less. The court will imply only those terms that are "standard" or "usual" as those terms have been interpreted in the jurisprudence.
As noted at para. 24 in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc. (1995), 1995 CanLII 10638 (ON SC), 23 O.R. (3d) 766 (Ont. Div. Ct.); aff'd [1995] O.J. No. 3773 (Ont. C.A.):
It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. This principle accords with common sense and normal business practice.
In determining what terms falls within the scope of a standard release, the jurisprudence has established that the test to be applied is objective, rather than the subjective intentions of the parties to the settlement. Two guiding principles driving this analysis are the general purpose of releases and the business efficacy of settlement agreements.
…
In Abouchar, the court had to determine whether a non-disclosure clause was an implied term of the standard general release that was required by the settlement and silent with respect to the required terms. There was no discussion leading to the settlement concerning inclusion of a non-disclosure clause as a term of the release. When the defendant inserted a non-disclosure clause into the draft release in its favour, the plaintiff refused to sign it.
The court rejected the proposed non-disclosure clause finding this type of clause was not standard or usual in releases. The parties bargained for a standard general release with only the usual terms. Therefore, this type of clause was not specifically agreed upon by both parties it was not an implied part of the bargained for release. At para. 11, the court ordered the plaintiff to sign the release in the form proposed by the defendant excluding the non-disclosure clause: "The gist of a "complete and final" release is for the plaintiff to discharge the defendants (and other persons referred to therein) from any action, complaint, claim, indebtedness, etc. In my opinion, the non-disclosure clause is not part and parcel of a release. If one wishes to insert one, it must be "negotiated."
Abouchar is instructive but I disagree with Terranata's application of the ratio to this case. The key finding in Abouchar was that a non-disclosure clause is not a usual term of a general release. Accordingly, the court would not imply a non-disclosure clause into this standard general release because it was not specifically agreed upon in advance of the settlement.
[19] Unlike in Terranata, the agreement before me was not silent on the terms of the release. The moving parties made this particular release conditional on settlement, and it contained a provision that had not been negotiated.
[20] The Ferron case is very similar to the one at bar, in that, amid settlement discussions, the plaintiff changed counsel. New counsel suggested a settlement had not occurred. Within her analysis, the motions judge made the following findings of fact at para. 27:
Having reviewed the e-mails and transcriptions of voicemails before me, as well as the affidavit evidence of Ms. Taylor and the plaintiff, I am satisfied that on or around December 15, 2004 the parties were ad idem on all of the essential terms, namely that the defendant would pay the plaintiff the amount of $35,000 in full satisfaction of his claim, the plaintiff would execute a Release including a confidentiality clause and the action would be dismissed without costs.
[21] The court in Ferron found that the release containing a confidentiality clause was an essential term and further found that the parties had specifically agreed to that provision. There is no suggestion before me that Ms. Boukanis agreed to execute a release with a confidentiality clause.
[22] The second submission – that the confidentiality clause should not be considered significant because it was not raised by the responding party as an issue until the delivery of his responding material to this motion – also fails. I was not provided with any caselaw to support the proposition that a party must explain why they are rejecting an essential term of a settlement offer. The responding party clearly indicated she was rejecting the LawPRO release. The moving parties had made that release an essential term. As a result, there was no meeting of the minds and there is no settlement.
[10] I agree with the reasoning in Abouchar v. Conseil scolaire de langue francaise d’Ottawa-Carleton 1995 CarswellOnt 4182; (2002) 58 O.R. (3d). As in that case, the parties here never discussed a non-disclosure clause before the offer to settle was accepted. There was no breach or repudiation of either the spirit of the terms of the concluded settlement. See also Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721.
[11] In the text The Law of Releases in Canada, Fred D. Cass, Canada Law Book, page 65, the author notes:
…the prudent course for a party seeking confidentiality is to bargain for it as part of the process of reaching an agreement.
[12] No confidentiality clause is implied and the release shall omit same.
[8] The parties now all agree before me that the only point of contention is the inclusion of the non-disclosure clause in the release. The plaintiff objects to the inclusion of this clause, whereas the defendants argue that such clause is an implied condition of the settlement reached between the parties and that it is a reasonable one in the circumstances.
[9] There is no dispute as to the applicable law. Both parties rely on the pronouncement of Chief Justice McEachern in the case of Fieguth v. Acklands Ltd. (1989), 1989 CanLII 2744 (BC CA), 59 D.L.R. (4th) 114, 37 B.C.L.R. (2d) 62 (C.A.), at p. 121 D.L.R.:
The next stage is the completion of the agreement. If there are no specific terms in this connection either party is entitled to submit whatever releases or other documentation he thinks appropriate. Ordinary business and professional practice cannot be equated to a game of checkers where a player is conclusively presumed to have made his move the moment he removes his hand from the piece. One can tender whatever documents he thinks appropriate without rescinding the settlement agreement. If such documents are accepted and executed and returned then the contract, which has been executory, becomes executed. If the documents are not accepted then there must be further discussion but neither is released or discharged unless the other party has demonstrated an unwillingness to be bound by the agreement by insisting upon terms or conditions which have not been agreed upon or are not reasonably implied in these circumstances. (Emphasis added)
[10] This principle enunciated above was followed in a number of decisions of this very court, namely in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc., [1995] O.J. No. 721 (Gen. Div.) (Chapnik J.); Pukee v. Durham (Regional Municipality) Police Service, [2001] O.J. No. 1587 (S.C.J.) (C. Campbell J.). However, Justice Chapnik specifically observed about the role of a release:
It is well established that settlement implies a promise to furnish a release unless there is agreement to the contrary. On the other hand, no party is bound to execute a complex or unusual form of release: although implicit in the settlement, the terms of the release must reflect the agreement reached by the parties. This principle accords with common sense and normal business practice. (Emphasis added)
[11] When, on June 30, 1999, the plaintiff accepted the defendants' offer to settle, the parties also agreed that the plaintiff would execute a "final and complete" release (para. 3) with no further details being discussed. The terms of the release must be in accord with the offer to settle that was accepted by the plaintiff. In my view, a "complete and final" release does not entail the inclusion of a non-disclosure clause. Such clause does not constitute by necessary implication a term of the settlement reached by the parties. The gist of a "complete and final" release is for the plaintiff to discharge the defendants (and other persons referred to therein) from any action, complaint, claim, indebtedness, etc. In my opinion, the non-disclosure clause is not part and parcel of a release. If one wishes to insert one, it must be negotiated. According to the evidence adduced, the parties never discussed the potential need for a non-disclosure clause before the offer to settle was accepted by the plaintiff on June 30, 1999.
[12] The defendants allege that the inclusion of a non- disclosure clause is a common practice at the Commission. They blame the plaintiff for not having made his objections known regarding the inclusion of a non-disclosure clause to the defendants nor to the court in July 2000. In my view, based on the evidence adduced, these allegations have no relevance in the case at bar. Furthermore, the principle of non-admission of liability that was specifically raised in the offer to settle is not inconsistent with the lack of a non-disclosure clause.
[13] The plaintiff seeks a judgment in the terms of the offer to settle tendered by the defendants and accepted by the plaintiff, and the defendants seek an order requiring the plaintiff to execute a release as presented in Exhibit A to the affidavit of Sean McGee sworn on July 2, 2001. Unfortunately, this document was not filed with the court.
[14] Accordingly, the appropriate order to grant is a judgment in the terms of the offer to settle accepted by the parties. I have reviewed the release shown under Tab 2 of the motion book of the Board titled "Complete and Final Release" (attached hereto). In my view, this release (excluding the paragraph containing the non-disclosure clause) is reasonable and fair, and must be acceptable to the plaintiff. As a result, an order will issue requiring the plaintiff to execute a release in the form of the document attached hereto and titled "Complete and Final Release".
Conclusion
When a legal proceeding is settled, it is implied that a Release document will be prepared and executed (signed). Essentially, a Release is a type of contract, specific to the settlement of a legal proceeding and which is used to memorialize the negotiated discussions and the terms and conditions agreed to as a resolution to the issues in dispute. Typically, a Release contains or reiterates the terms of settlement such as details regarding the payment of monies including schedule of payments. Also, where negotiated and agreed to, a Release may contain clauses regarding non-admission of liability as well as non-disclosure or confidentiality.