I’m doing what I can to advance the cause, but we’re all fortunate to have Glenn West plugging away, posting his analyses at such a rate that I have a hard time keeping up. For his collected oeuvre, go here.
Today’s post is inspired by something from his archives, this 2016 post about whether a provision in which nonparties are said to release a party from all claims is in fact enforceable against those nonparties. Here’s the issue, as expressed by Glenn:
It is one thing to extend the benefit of a release to a category of related parties, but it is quite another to purport to bind that category of related parties by a release that is not in fact signed by each of those related parties. This is particularly true where the related parties purported to be so bound are not entities controlled by the parent company, but individual shareholders officers, directors, members or partners of that parent entity.
Yes, as Glenn notes, a Delaware court has rejected “the argument that those entities and persons included within the laundry list of terms collectively comprising the ‘Related Parties’ could never be bound by the release simply based upon the fact that they had not signed the release on their own behalf or been specifically named a party.” But I don’t want to fight about whether a nonparty has in fact released something. If you have nonparties releasing stuff, it would be a good idea to make them parties, if only for purposes of the release.
4 thoughts on “Having Nonparties Release Stuff”
Either make them parties or have them sign separate releases and attach them to the agreement.
Putting aside for the moment the language (pretty hard for you I understand) but what about the release of the non-signing Related Parties being contingent on such parties releasing whatever it is the drafter wants them to release.
The issue is whether a release by nonparties is enforceable, not whether nonparties can benefit from a release.
Is there some standard language laying out the status of limited-purpose parties, or must one draft bespoke wording for each type? The types I see most often are brokers in real estate sale contracts, and escrow agents in agreements to substitute cash bonds for liens on realty.