What Are General Releases?
When entering into a business relationship, it is important to consider the use of general (sometimes called legal) releases. A general release is a legally binding document in which one party (the releasor) agrees to waive their right to pursue further legal action against another party (the releasee), even if the releasee may have been at fault. This can be an invaluable tool for businesses, as it helps protect both parties from legal liability. General releases are most often used in business relationships such as contracts, leases, employee agreements, and even in franchise agreements. By signing a general release, both parties agree to waive any potential legal claims related to the agreement or transaction in question.
In plain English, this means that if you sign a general release (you would be the releasor) you are waiving any rights you may have to file a lawsuit against the other party (releasee). As strange as it may sound these are legally enforceable in general and can result in you losing all rights to bring a lawsuit against a party even in the event they have breached a contract or wronged you in some way.
Why are General Releases Important?
As you can imagine general releases are very important in a business context. By signing a general release, you are ensuring that you cannot later claim you were wronged in some way (and ultimately unable to bring a lawsuit due to that wrong). This is especially important in business transactions where you may very well have the right to bring a lawsuit due to a breach of contract but can be legally prevented from doing so based on the general release.
General releases are often negotiated and well understood before signing so it is not something that is usually a surprise but it can have a major impact on your business plans and a valuable consideration for any franchise mutual termination. Ultimately, when entering into any business relationship it is important to carefully consider the purpose and impact of a general release. Doing so can help ensure that both parties are on the same page and protect them from potential legal consequences down the road.
How are General Releases Used in the Franchise Industry?
General releases are commonly used in franchise agreements and the franchise industry, as they help protect both the franchisor from potential legal liability. Typically a general release is required by the franchisor whenever a franchise agreement is renewed or modified or transferred to another party. This is designed to prevent the franchisor from being sued and to make sure potential claims are settled before they escalate to litigation. These can sometimes be an afterthought for a franchisee to review before signing but can have major repercussions for future potential claims against the franchisor.
Franchisees should carefully review and consider whether they have any potential claims, what those claims may be, and the ultimate potential value of those claims before signing away those rights. Note that it is actually prohibited for franchisors to require a general release of a franchisee when initially signing the franchise agreement. This is because the FTC Franchise Rule finds it unconscionable and illegal to disclaim any statements or disclosures made in the FDD. So if you see a general release before signing your franchise agreement, be very wary.
Here are a few key points to remember when reviewing a legal release:
– Make sure the language is clear and unambiguous so that all parties understand what the release entails. Most importantly, make sure you understand fully what you are signing.
– Be aware of any potential claims you may have, as signing away these rights could be costly in the future. It may be helpful to review potential claims with a litigation attorney to get an idea of what the cost or reward may be based on your potential claim.
– If a general release is required when renewing or transferring a franchise agreement, make sure to review it carefully before signing.
– Understand that a general release is illegal to request when initially signing a franchise agreement.
By understanding the importance and implications of a general release, you can help ensure that your business is protected from potential legal liabilities in the future. It is essential to always review any documents related to a franchise agreement and understand exactly what will be required of you before signing.
It is important to discuss any general releases with a lawyer who is familiar with the law in your jurisdiction before signing so you can get a precise idea for the legal consequences of signing. As experts in franchise law, we can help you handle these legal aspects. Call Reidel Law Firm today at (832) 510-3292 or fill out our contact form to see how we can assist!