Releasing the Unknown:Theoretical and Evidentiary Challenges in Interpreting the Release of Unanticipated Claims

Abstract

This paper examines the theoretical and evidentiary challenges associated with interpreting the release of claims that are unknown to private parties at the time the release is executed. It has three objectives. First, the author examines the relevant case law concerning the judicial enforcement of releases of unknown claims. The author shows that courts regularly apply the doctrinal framework of objective contractual interpretation, while at the same time they state that the scope of the release is limited to the claims that are contemplated by the parties at the time of the execution of the release. The unclear relationship between objective intention and contemplation requirement is at the root of the legal uncertainty surrounding the determination of the scope of the release. Second, the author contends that the doctrinal framework of objective contractual interpretation confusingly characterizes the judicial task. When deciding whether unknown claims are included within the scope of broadly worded releases, courts do not engage in a genuine interpretive effort; rather, they engage in a gap-filling exercise. Finally, the author proposes a default rule to provide guidance on the judicial allocation of the risk associated with unknown claims. The proposed rule consists of the three principles: (1) courts should presume that generally worded releases are objectively intended to release all claims that are discoverable with reasonable diligence by the parties at the time the release was executed; (2) the plaintiff-releasor advancing an unanticipated claim should bear the burden of proving that at the relevant time, they could not, with reasonable diligence, have acquired knowledge of the claim; (3) the plaintiff’s knowledge of a claim is evidenced by their knowledge of the elements constituting a claim. The author contends that by adopting such proposed principles, Canadian courts will see an incremental improvement in both legal certainty and predictability in cases concerning the effect of general releases on unknown claims.

Keywords: Release, Contractual Interpretation, Objective Intention, Text, Context, Default Rules

JEL Classification: K12