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Watch Those Waivers: Ambiguity in Release Results in Loss of Claim

Recent attempts to limit a release in a settlement agreement arising from the planned construction of condominiums and a hotel in Louisiana proved fruitless.

In Traxler Construction v 300 Mile Investments, Ltd., 300 Mile (the original defendant and partial owner of the hotel developer) attempted to file a crossclaim against Brandon Architects for allegedly defective design work. But 300 Mile and Brandon (and others on the project) were also parties to a compromise agreement that was intended to resolve disputes arising from the project. Despite 300 Mile’s best arguments otherwise, the sweeping language in the agreement proved to be the ultimate undoing of 300 Mile’s claims against Brandon.

The project was divided into four contracts, two of which (the first and fourth) involved design work to be performed by Brandon. The other two contracts were for the purchase of retail and residential condominiums by Brandon from the hotel developer. Ultimately, only the first contract was completed and Brandon was paid in full for that work.

After some services had been performed under the fourth contract, the parties decided to part ways. In so doing, Brandon was released from the two purchase agreements. As to the fourth contract, Brandon accepted a sum certain for partial performance and released its plans and drawings to 300 Mile.

In the settlement agreement itself, 300 Mile (and the hotel developer) agreed to release and waive claims “whether known or unknown, now existing or hereafter arising,” against Brandon arising out of “any engagement to provide any services” with respect to the property on which the hotel and condominiums were to be constructed. Upon execution of the settlement agreement, the parties executed release, waivers and no further services were performed by Brandon.

Despite the agreement, 300 Mile sought to file crossclaims against Brandon (the litigation was filed originally by the general contractor on the project) relating solely to work performed under the first contract. When Brandon argued that the settlement agreement barred the claims, 300 Mile argued that the parties did not intend for the release to apply the first contract, citing the fact that the agreement did not call out the first contract specifically.

The court disagreed, finding that the failure to mention the first contract equated instead to an intent not to reserve rights as to the first contract. In so finding, the court emphasized the use of the broad and inclusive word “any” to describe “engagement” and “services.” Further, because the project only involved two “engagements,” the court found that the use of “any” indicated an intent that the release would apply to both.

The lesson from this case? It’s better to be safe than sorry. If the releasing party has any doubt what they are releasing and, equally importantly, what they are not, they should speak up before signing the papers and make their intentions known and explicit. Failure to reserve those claims likely will result in losing them for good.

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