If it isn’t in writing, it probably doesn’t count. If you are one of my clients, you have undoubtedly heard this from me. This is an oversimplification of the law, but in most situations, it is the end result. Almost every day, I am told the background of a dispute that has escalated to some sort of enforcement activity. In some cases, there was an oral agreement to perform services or supply goods that was not reduced to writing and some of the terms of the agreement were not worked out. Each side “assumed” what those other terms would be, and invariably, assumed differently. Written agreements, even informal summaries of key terms are prudent business practices. It is important to get something down on paper, even if you don’t use an attorney. Most business owners fear being held to written terms and possibly being sued. The fact of the matter is that written agreements are most often used defensively to keep business owners from being liable for things that were not part of the agreement. They are a shield as much as a sword.

Another common scenario is when business owners attempt to resolve a dispute between themselves but fail to sign a settlement agreement and general release that details the terms of the dispute settlement and prevents both sides from further enforcement activity on the same matter. A settlement agreement states that if the parties do what is recited in the agreement and mutually agreed to, both sides will consider the matter settled and waive any further claims against one another. Absent such written agreement, you may find yourself defending repeated complaints on the same issue or event.

Businesses can limit liability when resolving disputes by executing a written general release. There is standard language that is generally used, but any written agreement containing at least the following details will generally work:

1. Consideration: What is being given by each party to settle the dispute? (Money, promise to do something, promise to refrain from doing something).
2. Signature by someone with authority to bind the business (owner, officer, director, managing member), preferably having all principals sign on behalf of the business.
3. Statement of claims being released. Typically, “any and all claims, whether asserted or not, which Releasor hold arising from the contract dated June 1, 2005 for construction services” or “accident that took place June 1, 2005” or “all matters constituting, concerning, in connection with, or related to or arising out of X” that exist on or before the date this release is signed by the parties.”

There are other commonly included provisions in these agreements. Several are described below:

• Releasor owns the claims, has the power and authority to release them, has not assigned the claims, and will not sue on the claims, as well as that the Release Agreement contains the entire agreement between the parties concerning the matter.
• That the Releasor will withdraw or dismiss with prejudice any claims or reports that have been made as to the released claims, and will keep the claims, release and all facts involved in strictest confidence, and that providing the release is not an admission of liability.
• An attorney fee provision where a party who has to enforce the agreement can recover its attorney fees from the other party.
• Other agreements that sometimes are included are an agreement to arbitrate disputes related to the Release Agreement, a reference to a specific state’s law that will apply in interpreting the Release Agreement, an agreement not to assist others in bringing any released claims, and an agreement to keep the Release Agreement confidential. These clauses and the Release Agreement need to be crafted carefully based on the specific fact situation. For example, an entity that will be fundraising might not be able to give a blanket confidentiality clause since it will need to disclose material information to potential investors.

While these agreements may seem “pro forma,” they must be specifically drafted to address the issues in each unique situation. Even if you negotiate the settlement terms without an attorney, having an attorney review or draft your settlement agreement and general release can be a good idea to ensure you are protected against future liability.