Chapter 23 RELEASES, INDEMNIFICATION, AND EXCULPATORY CLAUSES
Jurisdiction | New York |
Chapter Twenty-Three
Releases, Indemnification, and Exculpatory Clauses
I. Releases
A release is a contract, and its construction is governed by contract law.3402 Consistent with the public policy favoring enforcement of settlements, releases should be enforced according to their terms.3403 It is well established that the party seeking to prove the validity of a release has the burden of proof. This burden extends to proving lack of duress, illegality and fraud.3404 In Fleming v. Ponziani, the Court of Appeals stated regarding the burden of proof of releases:3405
In the context of a litigation involving fraud in the factum 3406 in procuring a release it would be more precise to state that, since the law does not presume fraudulent acts, a party defending a suit on the basis of a release has a presumption in his favor that there have been no irregularities in its execution. This presumption will be sufficient to establish a prima facie case if the party can also prove authenticity of the signature on the document. Such proof shifts the burden of going forward, if he hopes to defeat the claim, to the adversary to show that there has been fraud, duress or some other fact which will be sufficient to void the release. Once this party puts in some evidence, the presumption is no longer in the case and, as previously indicated, since the burden of persuasion does not shift throughout trial, the person who is defending the action, claiming as a defense the release, must come forward with real evidence to sustain his burden as to the legality of the release or otherwise suffer a directed verdict. (See Potts v. Pardee, 220 N.Y. 431, 433; St. Andrassy v. Mooney, 262 N.Y. 368, 371; Richardson, Evidence (Prince ed., 1964), s 101; 9 Wigmore, Evidence (3d ed., 1940), s 2491, p. 289.). 3407
In Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V.,3408 the Court of Appeals summarized the essential principles of releases:
Generally, "a valid release constitutes a complete bar to an action on a claim which is the subject of the release." . . . If "the language of a release is clear and unambiguous, the signing of a release is a 'jural act' binding on the parties." . . . A release "should never be converted into a starting point for . . . litigation except under circumstances and under rules which would render any other result a grave injustice." . . . A release may be invalidated, however, for any of "the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake."
Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release "shifts the burden of going forward . . . to the [plaintiff] to show that there has been fraud, duress or some other fact which will be sufficient to void the release." . . . A plaintiff seeking to invalidate a release due to fraudulent inducement must "establish the basic elements of fraud, namely a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury." 3409
A release may not be treated lightly. It is a jural act of high significance without which the settlement of disputes would be rendered all but impossible. It should never be converted into a starting point for renewed litigation except under circumstances and under rules which would render any other result a grave injustice. It is for this reason that the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake, must be established or else the release stands. In the instance of mutual mistake, the burden of persuasion is on the one who would set the release aside.3410
Absent fraudulent inducement or concealment, misrepresentation, mutual mistake or duress, a valid release that is clear and unambiguous on its face constitutes a complete bar to an action on a claim that is the subject of the release.3411
A release is a contract that, unless its language is ambiguous, must be interpreted to give effect to the intent of parties as indicated by the language they utilized.3412 Releases must be construed like all other contracts3413 whose interpretation is governed by principles of contract law.3414
Where a release is unambiguous, the intent of the parties must be ascertained from the plain language of the agreement.3415 Where the language of a release is clear and unambiguous, the signing of a release is a jural act binding on the parties and will be set aside as a result of duress, illegality, fraud, or mutual mistake.3416 A stipulation may be modified or rescinded despite the releases it contains, where it is the product of a mutual mistake so material that it goes to the foundation of the agreement.3417
In construing a general release, it is appropriate to look to the controversy being settled and the purpose for which the release was executed;3418 the release may not be read to cover matters which the parties did not intend to cover.3419 The meaning and scope of a release must be determined within the context of the controversy being settled.3420 The scope of a general release depends on the controversy being settled and the purpose for which the release is actually given. If from the recitals therein or otherwise, it appears that the release is to be limited to only particular claims, demands or obligations, the instrument will be operative as to those matters alone.3421
Parties may agree to release one another from any future liability so that a release which unambiguously bars further litigation means any subsequent complaint must be dismissed.3422 "The meaning and scope of a release must be determined within the context of the controversy being settled."3423
Although the effect of a general release, in the absence of fraud or mutual mistake, cannot be limited or curtailed, its meaning and coverage necessarily depend, as in the case of contracts generally, upon the controversy being settled and upon the purpose for which the release was actually given. Certainly, a release may not be read to cover matters which the parties did not desire or intend to dispose of.3424 The fact that the releasor may have intended something else is irrelevant. Where the language of the release is clear, effect must be given to the intent of the parties as indicated by the language employed. If the releasor intends to reserve any further claims, words indicating a reservation must be inserted in the release.3425 Though normally the proponent of a document satisfies his burden of persuasion by offering the document, it is clear that, if his adversary raises the specter that the contract is void because of fraud, duress or incapacity in the execution of the agreement and offers proof with respect to that issue, then the party who seeks to sustain the validity of the document must come forward to rebut these facts by a preponderance of the evidence.3426
The parties' stipulation of settlement, in Schnee v. Schnee,3427 did not address the defendant's retirement accounts due to his refusal to cooperate. The stipulation noted that it only settled the issues of maintenance arrears, plaintiff's interest in the marital residence, and counsel fees. The defendant was required to pay the plaintiff $408,000. At the closing of the refinance, both parties were to "exchange unconditional mutual general releases." The defendant's draft of the general release referenced any and all claims arising from the matrimonial action. At the closing, both counsel entered into a mutual undertaking, which required plaintiff's counsel to deliver the release prepared by defendant following payment. Plaintiff later refused to deliver that release claiming it was improper and instead prepared and executed an amended release which preserved her claim in defendant's retirement accounts, which defendant rejected.
The Appellate Division held that the plaintiff's amended release satisfied her obligations because the defendant's proposed release did not reflect the parties' intentions as there was no indication that plaintiff intended to waive her interest in defendant's retirement accounts. The appellate court did not address the consequences arising from the fact that the parties had entered into a new contract, which the decision states had been supported by consideration, "the undertaking."
A release applies only to the issues settled by the stipulation and nothing more.3428 A release may not be read to cover matters which the parties did not desire or intend to dispose of.3429
It is not a prerequisite to the enforceability of a release that the releasor be subjectively aware of the precise claim he or she is releasing.3430 Notably, a release may encompass unknown claims, including unknown fraud claims, if the parties so intend and the agreement is "fairly and knowingly made,"3431 which applies to parties in a fiduciary relationship.3432 The requirement of an "agreement fairly and knowingly made" has been extended, however, to cover other situations where because the releasor has had little time for investigation or deliberation, or because of the existence of overreaching or unfair circumstances, it was deemed inequitable to allow the release to serve as a bar to the claim of the injured party.3433
The theory of mutual mistake, when acted upon by the courts in refusing to give full effect to a general release, is based upon a determination or conclusion that the minds of the parties failed to meet in agreement upon the essential elements of the instrument.3434
A valid release or waiver bars any action on a claim regarding the subject of the release.3435 When a release unambiguously bars further litigation, the court must dismiss the complaint.3436
In Schiller v. Guthrie,3437 Schiller, the former husband, and Guthrie, the former wife, operated a joint medical...
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