1. Rules for Release Clauses
2. Suppliers' Release Clause
3. Other Types of Release Clauses

A meet-or-release clause is one type of release clause within a contract. It allows contract signers to be released from the binding terms of a contract if certain circumstances occur.

Any release clause in a contract serves as an agreement between the parties, requiring one of them to forfeit their legal right to enforce the contract. The party may not sue the other party for failing to fulfill the terms of a contract. Anyone who signs such a contract needs to understand this going in.

Rules for Release Clauses

Since a release clause is considered a contract, release clauses are governed by contract law. Release clauses are legally binding, but only if the following requirements are met:

  • Both parties must be legally capable of forming a contract. They must be of legal age and sound mind.
  • Both parties must freely consent to the release clause without coercion.
  • The release clause cannot apply to any illegal action or circumstance.
  • The contract includes an offer and acceptance.
  • The release clause involves the exchange of consideration — payment or exchange of other items or services of value.

A release may either be part of a contract or a separate document. Either way, legal remedies will be severely limited. Release clauses are just as binding as the rest of the contract, and you should consider speaking with an attorney before signing a contract that includes one.

An attorney also should be consulted when release clauses are drafted. Such expert advice helps to resolve disagreements that may arise in the future and prevents them from happening in the first place.

Suppliers' Release Clause

With a meet-or-release clause, a supplier and customer agree that if the customer finds a better price offered by the supplier's competitor, the supplier must offer the same price or a lower one. If the supplier does not “price match,” the customer is released from the contract they signed to buy products from the supplier and may go elsewhere.

Meet-or-release clauses can run into problems with competition laws because they prevent competing suppliers from having the opportunity to earn customers' business. Suppliers can use these clauses as a way to monitor the prices offered by their competitors, resulting in unfair competition.

Other Types of Release Clauses

There are many different types of release clauses in use, and they are adapted for a range of purposes. Here are just a few examples of situations in which it may be useful to draft a release clause as a separate agreement or to include it in a contract:

  • Personal Injury: When an activity involves a high risk of injury or even death, a release clause will be employed. Examples include extreme sports like hang gliding, parasailing, skydiving, rock climbing, or skiing. Instructors, property owners, or equipment rentals may ask customers to sign a release so they are not legally liable for any injuries that may occur while the customer participates in the activity.
  • Construction Projects: Contractors involved in construction use many different kinds of release clauses to protect themselves from legal liability if a dispute should occur between parties. Such release clauses may be between the contractor and their client, the contractor and their suppliers, or even with employees of the contractor.
  • Business Contracts: Business partners often sign contracts that involve release clauses. Disputes in the course of conducting business are common, and release clauses may be used to encourage parties to work out alternative ways to solve problems, such as mediation or negotiation.
  • Real Estate Development: A release clause allows for the release of collateral when the borrower pays off at least part of a loan. Such clauses are widely used in mortgages for subdivision developers. The lender has to release its lien on the property when a potential purchaser of one of the subdivision homes applies for their own mortgage.
  • Real Estate Sales: Another type of real estate release clause exists between a buyer and seller. It's common for a buyer to accept an offer but still allow the seller to seek other offers for a certain time period. In this case, the release applies to the seller, who is released from their exclusive obligation to the buyer while they try to find better offers. Typically the time limit is 72 hours.

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