General Release of Liability

In a small business context, a general release may be used in a variety of circumstances. General releases are documents with legal effect, provided specific requirements are met. Because general releases are contractual agreements, they must adhere to certain contract principles. General releases involve one party surrendering the right to sue — or bring a claim against — another party. The individual who agrees to release another individual from future claims is the releasor; the individual being released from future claims is the release.

A general release may be sought by an injured party or by the party who allegedly caused an injury. These contractual agreements require “consideration” to be valid. This means a general release is not valid unless the releasor receives something of value in exchange for signing the release. Moreover, a general release concerns an existing dispute; the releasor agrees to relinquish his right to assert future claims arising from the existing dispute.
General Release from Contract Liability

Where a general release involves a contractual dispute, the injured party — or the releasor — agrees to accept something of value in exchange for releasing the other party, or releasee, from future contract liability. In a small business context, a vendor or supplier might agree to release a business owner — with whom he has a contract for the sale of goods — from future contract liability in exchange for a sum of money. This type of situation could arise if a business owner signed a long-term contract with a vendor for regular shipments of goods, but the business couldn’t keep its end of the bargain due to a drop in sales, for example.