7th Circuit Releases Primer On Releases

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

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    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.                                                                 

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.”

Welcoming Trevor Sawyer

Sharp-Hundley, P.C. is pleased to announce that Trevor Sawyer, 2017 graduate of the Loyola University (Chicago) School of Law, has joined the firm as an associate.

A Mt. Carmel, IL, native, Sawyer received a Bachelor of Science Degree in paralegal studies from Southern Illinois University in 2014.  He then studied law at Loyola-Chicago, where he was on the Dean’s List multiple semesters.

While at SIU, Sawyer was a member of the Delta Epsilon Iota Academic Honor Society and the Lambda Epsilon Chi National Paralegal Honor Society. 

“We are very happy that Trevor is joining us,” said Sharp-Hundley President John Hundley.  “We look forward to his many contributions to our practice and our clients.” 

At Sharp-Hundley, Sawyer will concentrate his practice in civil litigation, creditors’ rights, real estate and related matters.  He may be reached at our Mt. Vernon office, 618-242-0200, Trevor@sharp-hundley.com.

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No Relief For Party That Fails To Exercise Option On Time

                Rejecting contrary authority, a panel of the Appellate Court in Chicago has ruled that equitable relief is barred where an option contract indicated that time was of the essence and the time deadline was not met, or where a contracting party lost its right through negligence or mere forgetfulness. 

            Ruling in Michigan Wacker Assoc., LLC v. Casdan, Inc., 2018 IL App (1st) 171222, the court dealt with a situation where a lessee had said that it “would like to exercise” the option well before the deadline, but only as part of a proposal to rework lease terms in several other ways.  The failure of the lessee to follow up with a concrete acceptance by the deadline was found to be fatal.

            Citing precedent from 1900, the panel said that a “contractually mandated time for performance is generally an essential term of a contract” and, unless waived, “an option is lost due to untimeliness.”

            Noting that courts generally have required strict compliance with options, the court said that “actual or oral notice is insufficient to exercise an option where a party has failed to provide timely written notice.”

            Moreover, it said an “acceptance of an offer contained in an option must be specific, certain, and unconditional.”

            Noting that some courts had allowed equitable relief to rectify blown options, the Michigan Wacker panel refused to go down that path.  It said such relief was not available where the lease stated time was of the essence (as did the lease at issue), or where the deadline was blown through negligence (as arguably also was the case).

SHARP-HUNDLEY, P.C.
1115 Harrison, Mt. Vernon, IL 62864 • Telephone 618-242-0200 • Facsimile 618-242-1170
www.sharp-hundley.com

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