What if a business owner is relying on statements made in the settlement negotiations?
Nonreliance and integration clauses mean that statements and promises not contained in the written agreement probably will not be considered by a court. But this applies to the business owner, too. If an owner is relying on a statement made in negotiations, that should be included in the agreement.
Are there potential problems with releases in settlement agreements?
Usually, the purpose of a settlement is for both sides to give up, or ‘release’ their claims against each other. Sometimes, however, releasing claims against one party may have the unintended effect of releasing claims against other unnamed parties. There is an old rule that the release of one wrongdoer releases everybody liable for the same harm. Many lawyers believe this rule has been abrogated by statute, but this is only partially correct.
Illinois has abrogated the rule that a release of one joint tortfeasor releases all tortfeasors. What many lawyers do not recognize is that this applies only to tortfeasors. As a result, the common-law rule that an unqualified release of one who caused a monetary loss precludes a claim against other parties who caused the loss continues to apply to, for example, co-obligors on a contract and claims for joint breaches of fiduciary duty. If there are other parties that a business owner does not want to release, an attorney can address this issue.
Will a release bring total peace?
Not always. A general release might not be deemed to release claims that one party claims it did not know about when it signed the release. A business may be able to protect itself by providing in the written document that the parties are aware they may have claims against each other they do not know about, and the release is intended to bring total peace and release even unknown claims.
Are there other issues to be aware of?
Certainly. If a party with whom a business owner has settled sues again on that settled claim, in blatant violation of a settlement agreement, the owner could still have to pay lawyers to defend the suit. A provision in a settlement agreement providing for attorneys’ fees to be awarded to the prevailing party in a dispute wherein the settlement agreement is raised as a defense may help protect against such problems.
Timothy J. Miller is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or [email protected].
