A Canadian Mutual Release Agreement is a bilateral contract in which two parties simultaneously and irrevocably release each other from all existing or potential claims, demands, and causes of action arising from a specific dispute, relationship, or transaction. Unlike a unilateral release (where only one party waives claims), a mutual release creates reciprocal obligations: each party acts as both releasor and releasee, giving up the right to bring future claims against the other while receiving the same protection in return.

The legal foundation of a mutual release under Canadian common law is the doctrine of accord and satisfaction. The accord is the parties’ agreement to accept the mutual release (and any accompanying settlement payment) as a substitute for the original disputed obligations. The satisfaction is the actual performance of that agreement — the execution of the release and the payment of any settlement amount. Once accord and satisfaction are complete, the original obligations are permanently extinguished, and neither party can revive them.

Canadian courts have consistently upheld the enforceability of mutual releases when the essential elements of a valid contract are present: offer, acceptance, consideration (the mutual exchange of releases constitutes adequate consideration even without a monetary payment), and intention to create legal relations. The Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp. (2014 SCC 53) confirmed that settlement agreements, including mutual releases, are interpreted using the same contractual interpretation principles as any commercial contract.

The British Columbia Court of Appeal recently reinforced the breadth of mutual releases in Chan v. Chan (2025 BCCA 262), holding that where a settlement is clearly intended to end an entire dispute, a mutual release may be implied even in the absence of express written language. This underscores the importance of drafting explicit and comprehensive mutual release terms to avoid future litigation about the scope of the release.

When business partners or co-venturers are dissolving a partnership, joint venture, or shared enterprise and wish to release each other from all claims related to the management, operation, profit distribution, and winding-up of the business, ensuring a clean separation without ongoing legal exposure.

When an employer and a departing employee have negotiated a separation package and both parties wish to release each other from all employment-related claims, including wrongful dismissal, constructive dismissal, human rights complaints, unpaid wages, and breach of employment agreement.

When two businesses that have been engaged in a contractual relationship (supply agreement, service contract, licensing arrangement) are terminating the relationship and wish to mutually release all claims related to performance, payment, intellectual property, and any disputes that arose during the term of the contract.

When parties to a commercial lease — landlord and tenant — are terminating the tenancy early and wish to release each other from claims for unpaid rent, property damage, leasehold improvements, and any other obligations under the lease agreement.

When family members or personal acquaintances are resolving a financial dispute (informal loan, shared property, gift dispute) and wish to formalize the resolution with a mutual release to prevent future claims and preserve the personal relationship.

When parties who have been involved in litigation or a tribunal proceeding have reached a negotiated resolution through mediation, pre-trial conference, or direct negotiation, and need to formalize the settlement with a mutual release before filing a Notice of Discontinuance with the court.

Identification of Parties — Full legal names and mailing addresses of both parties, with clear designation of the bilateral nature of the release (each party is both Releasor and Releasee simultaneously).

Relationship and Dispute Description — A specific description of the relationship between the parties and the nature of the dispute, claims, or matters being mutually released. This defines the scope of the release and provides the factual context that Canadian courts use when interpreting the agreement’s terms.

Mutual Release Clause — The core operative provision in which each party irrevocably releases and discharges the other party and all associated persons (officers, directors, employees, agents, heirs, successors, and assigns) from all claims, demands, damages, and causes of action, whether known or unknown, arising from the described dispute or relationship.

Accord and Satisfaction — An express statement that the mutual release constitutes an accord and satisfaction under common law, permanently discharging all original obligations. This prevents either party from arguing that the original claims survive the release.

Settlement Payment — If applicable, the amount (in CAD), payment method, and deadline for any monetary consideration exchanged as part of the mutual release, with default and acceleration provisions.

Discontinuance of Proceedings — If litigation is pending, provisions requiring both parties to file a Notice of Discontinuance with the applicable court or tribunal within a specified number of business days, on a without-costs basis.

Carve-Outs — Exclusions for obligations created by the release agreement itself, claims arising from fraud, gross negligence, or wilful misconduct, and statutory rights that cannot be waived under applicable federal or provincial legislation.

Governing Law and Jurisdiction — The province whose laws govern the agreement, with exclusive jurisdiction in the courts of that province for any disputes arising under the mutual release.