Terranata, the Standard Release and Implied Indemnity

  • February 11, 2021
  • Ivan Merrow

After initial blows have been exchanged in most litigated disputes, opponents often resolve their differences with a negotiated settlement agreement. To preserve the ceasefire, a key term included in many settlements is the exchange of a release. 

Releases, however, may take many forms. If the release’s key terms are left undefined in the settlement agreement, a major difference of opinions may threaten the viability of the settlement. The recent case of Terranata Winston Churchill Inc. v. Teti Transport Ltd., et al., 2020 ONSC 7577 (“Terranata”) proves that the opposite may also be true: parties’ failure to agree on the scope of a release may lead the court to read in more expansive implied terms than anticipated. 

Terranata explores the meaning of a “standard” release in the context of multi-party and multi-action construction disputes. This decision also serves as a warning to settling parties—unconditionally agreeing to an undefined release may have unintended consequences.