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Settlement Agreements and Releasing Latent Defects

When settling construction defect claims and entering in a mutual general release, there are numerous items that contractors must address in order to ensure exposure for future lawsuits with the plaintiff are minimized.  One such item is what is known as a latent defect, which is typically defined as a defect that is hidden or concealed, and which is not discoverable by reasonable inspection.   Specifically, general releases have been held to be completely enforceable and act as a complete bar to all claims, known or unknown at the time of release.  Brooklands, Inc., v. Sweeney, 2015 WL 1930239  (S.D. Fla. 2015) citing  Belasco v. Wells, 234 Cal. App. 4th 409 (Cal. Ct. App. 2015).

Ensuring that a plaintiff releases latent defects can be critical.  As such, the release of latent defects is the focus of a significant amount of litigation; however, Florida courts have continued to hold that such agreements are enforceable under Florida Law.  In fact, Florida courts have held such releases to be enforceable despite fervid protest by a plaintiff that they did not intend to release certain types of claims.

However, in order to maximize the likelihood that a court will enforce a provision to release latent defects, is it crucial to ensure that the release of latent defects is entirely clear unambiguous.  Making such an agreement express in the language of a general release provides distinct evidence to the court that the release of latent defects was the direct result of the negotiations that took place leading up to the execution of the release document.  Finally, it is also important to include a “non-reliance” clause to show the court that the parties are solely relying upon the express terms of the general release.  Generally speaking, these clauses state that the parties have not relied on any representations other than those set out in the Agreement.

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