What Is a Mutual Release Agreement?

If you’ve ever asked the question, “what is a mutual release agreement”, then you’ve come to the right place.

Understanding a mutual release agreement shouldn’t be hard; that’s why we’re here to help. First, it’s important to understand what a mutual release agreement is, the circumstances in which they’re used, as well as the common clauses that need to be included when drafting the contract so that both parties are protected against potential disputes.

A mutual release agreement is a broad release contract used to indemnify both parties should there be a claim that one of the two parties in question is responsible for any damages or injuries that occurred.

No one wants to be liable for damages or injuries that may occur within any context. By signing a mutual release, all parties involved agree to forfeit any claim they have against the other, including any potential claim that may not have been stipulated upon signing the contract. For example, it might not be immediately evident after a car accident what the full extent of someone’s injuries or the total cost of repairs is, but signing a release of liability form would mean giving up any of these potential claims.

The agreement must be signed by any party involved in the dispute, and the parties must know their rights and exactly what they’re giving up by signing the release.

When two parties mutually release each other, it can save everyone involved significant legal expenses that could otherwise be incurred.

When Mutual Release Agreement Is Used

Imagine two people backing their cars out of their parking spaces at the same time and colliding with each other. Both drivers are at fault, which means they could engage in a legal dispute to settle the grievances they have against each other.

When situations like this come up, it might be appropriate for the parties involved to sign a mutual release agreement. This would mean releasing each other from any legal responsibility and forfeiting the right to pursue legal action.

Mutual release agreements are also commonly used in matters of debt settlement, contracts, partnerships, and personal injury.

Common Sections in Mutual Release Agreement

These are some of the most common sections included in mutual release agreements:

Releases: A description of exactly what each party is releasing the other from.
Termination: The parties involved agree to terminate any previous agreements and release each other from any obligations.
No Admission: Confirmation that neither party is acknowledging liability of any kind by agreeing to release each other.
Entire Agreement: A statement confirming this agreement is the entire agreement and supersedes any other prior understandings, promises, etc.
Amendment: No amendments will be made except in writing and confirmed with the signature of each party.
Representations and Warranties: A list of specific representations and warranties that each party is making.
Successors and Assignment: A confirmation that the agreement may not be assigned to anyone else without written consent from the other party and that it will be binding upon successors.
Legal Counsel and Voluntary Agreement: Acknowledgment that both parties have been advised by their respective legal counsel and enter into the agreement voluntarily and with full understanding.
Severability: If any specific clause within the agreement should be ruled unenforceable by law, it will in no way affect the enforceability of the remainder of the agreement.
Choice of Law: Confirmation of which state’s laws the agreement will be governed by.

Final Thoughts

Mutual release agreements can be useful in a wide range of situations, like when both parties are at fault or when the parties involved want to avoid legal proceedings. If you find yourself in a situation where you need a mutual release agreement, it’s important to remember the essential clauses to include and to get legal assistance where needed. Keep an eye out for the rescission clause in the agreement; it’s important to know the terms of cancelation for any contract.

That’s one part of the equation, but the other part is actually creating, sending, signing, and storing release agreements like this. To expedite the process, you might benefit by using a waiver management solution like PandaDoc Waivers that does the heavy lifting for you. It’s free to use and makes it easier than ever to create waivers, send and share them, and collect signatures.