Page 13 - John Hundley 2018

Focus on Contract Law

Sharp Thinking

No. 152 Perspectives on Developments in the Law from Sharp-Hundley, P.C. May 2018

7th Circuit Releases Primer On Releases

By John T. Hundley, john@sharp-hundley.com, 618-242-0200

The U.S. Court of Appeals for the Seventh Circuit recently has compiled a primer for
interpretation of the broad language customarily inserted in settlement agreement releases.

Writing in Engineered Abrasives, Inc. v. American Mach. Prods. & Serv., Inc., 882 F.3d 650 (7th
Cir. 2018), the court noted the following rules under Illinois law:

• The court’s job “is to determine what the parties intended”;
• However, unless the agreement is ambiguous, courts look to the
language of the settlement agreement to determine the parties’ intent;
• If the agreement contains specific as well as general terms, the specific
language controls;
• The presence of both specific and general terms can create an
ambiguity, making parol evidence of intent permissible;
• If the agreement is unambiguous, a unilateral or self-induced mistake
is not a ground for setting aside the release;
• A general release typically covers all claims a party knows or easily
could have discovered;
• Where the document’s release language is entirely general, and both
parties were aware of an additional claim at the time of signing, the
general language will be held to bar the additional claim. Hundley

In Engineered Abrasives, bad blood had led to at least two lawsuits between the businessmen,
and the first had resulted in a $715,000 default judgment. Later, a magistrate judge brokered a much
smaller settlement of the second suit. That settlement’s impact on the first
suit apparently was never discussed; nevertheless, the parties executed a
settlement agreement that included only general release language (releasing
“all rights, claims, debts, demand…and/or causes of action of every nature,
character and description…which [releasor] ever had, now has or may
hereafter claim to have by reason of any matter cause or circumstance
whatsoever arising or occurring prior to and including the date of the
Agreement”).

Applying the foregoing rules to that agreement, the court said the release “releases all claims
and liabilities between the parties – including the earlier default judgment.”

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
your particular situation, contact a Sharp-Hundley lawyer at 618-242-0200 or one of the addresses provided on page 2 of the newsletter.