Contract Glossary
Release of Claims
Definition
A legal agreement in which one party permanently gives up their right to sue the other party for specific claims, known and sometimes unknown. Once signed, the releasing party cannot bring legal action for the covered claims, even if they later discover the damages were worse than expected. Releases are common in settlement agreements, employment terminations, and contract closeouts.
In Practice
An employee is terminated without cause and offered a severance package: 3 months' salary plus continued health insurance. In exchange, the employee signs a release of claims covering wrongful termination, discrimination, harassment, and any other employment-related claims. Once signed, the employee receives the severance but can no longer sue the company for anything related to their employment. This is standard practice, companies rarely pay severance without obtaining a release, and employees rarely sign a release without receiving something valuable in return.
Example Clause
In consideration of the payments and benefits described herein, Employee hereby irrevocably releases and forever discharges the Company, its officers, directors, employees, agents, successors, and assigns from any and all claims, demands, causes of action, and liabilities of any kind, whether known or unknown, arising out of or related to Employee's employment or the termination thereof, including but not limited to claims under Title VII, the ADA, the ADEA, and any applicable state or local employment laws.
Common in these contract types
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