Small Business Clinic

Written Homework #6

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Mutual Release

Background

This assignment is based on a real case. There is a dispute between a tenant and a landlord (your firm's client). The attorney for the tenant has threatened litigation. The two attorneys, over the phone, have tentatively agreed to the terms of a settlement. Your homework is to prepare the settlment document.

THE DISPUTE: A commercial lease was executed on 9/6/11 (click here to view the actual lease from the real case). On that date the Tenant paid the first and last month's rent plus the required security deposit. But before the tenant could take possession lightning hit the building and damaged the electrical system. There was a delay in fixing the problem because of the damage was so extensive and there was difficulty in getting the building permit approved. After a couple of months the landlord threatened to declare a default because the tenant had failed to put the utilities into its own name and to obtain the necessary insurance (as required by the terms of the lease). This triggered an angry response from the tenant's lawyer who threatened to sue because of the delay in turning over posession (despite the fact that there was language in the lease saying that such a delay was not a breach under this type of situation).

For purposes of this writing assignment assume that you are living in the year 2012 and a partner in your firm gave you this task on April 21, 2012 which is the date of the tentative verbal settlement mentioned above.

The Tenant's lawyer called the lawyer in your firm on 4/21/12. He rejected Landlords claim that the tenant was in breach and threatened an immediate lawsuit stating that it was the Landlord who was in breach. After some heated going back and forth the two lawyers calmed down and verbally agreed to the terms of a tentative settlement (outlined below)

Writing Assignment

Prepare a mutual release document that can be executed by the parties to formalize a settlement that has been verbally agreed upon.

HINT: Since litigation has not yet commenced the better template for this document is a "Mutual Release" as opposed to a "Settlement Agreement". Typically the Settlement Agreement type template is used when litigation has already been commenced whereas a Mutual Release type template is typically used to settle disputes where litigation has not yet commenced. Either template could be OK provided that it is carefully crafted (though a Mutual Release would seem to be the better choice).

Avoid reciting your client's understanding of the factual background (because some of those facts are in dispute). It is enough to say something general such as disputes have arisen between the parties on account of the Lease (etc).

The Settlement Terms Agreed Upon
by the Two Attorneys

The Lease would be reinstated under its original terms except that the "Commencement Date" was to be changed to 6/1/12.

One month's free rent would be provided to the Tenant (with the landlord acknowledging that the Tenant had already prepaid the first month's rent at the time that the Lease was executed)

The Landlord would pay the tenant $2,500 to compensate it for the cost of its attorney with the payment being made no later than the new Commencement Date.

At least five days prior to the new Commencement Date the Tenant must comply with the requirements of the Lease by providing the Landlord with the required "Certificate of Insurance" and proof that the electrical and water utilities had been transferred into the Tenant's name.

Contingent upon each party complying with the settlement terms, the parties, upon execution of the document, release each other from any and all liability of any nature whatsoever that might have arisen up to the date that the settlement document is executed.