Quitclaims and requirements on validity (1)

Quitclaims and requirements on validity (1) | Daily Tribune

Quitclaims are contracts in the nature of a compromise where parties make concessions, a lawful device to avoid litigation. It is a valid and binding agreement between the parties, provided that it constitutes a credible and reasonable settlement and the one accomplishing it has done so voluntarily and with a full understanding of its import.

In executing a quitclaim, the parties adjust their difficulties in the manner they have agreed upon, disregarding the possible gain in litigation and keeping in mind that such gain is balanced by the danger of losing.

While quitclaims are generally intended for the purpose of preventing or putting an end to a lawsuit, jurisprudence nonetheless holds that the parties are not precluded from entering into a compromise even if a final judgment had already been rendered.

As pointed out in Magbanua v. Uy, “[t]here is no justification to disallow a compromise agreement, solely because it was entered into after final judgment. The validity of the agreement is determined by compliance with the requisites and principles of contracts, not by when it was entered into.”

While it is true that the law looks with disfavor on quitclaims and releases by employees who have been pressured into signing them by employers seeking to evade their legal responsibilities, in certain cases, the Court has upheld the validity of quitclaims executed by employees if the employer is able to prove the following requisites:

(a) the employee executes a deed of quitclaim voluntarily;

(b) there is no fraud or deceit on the part of any of the parties;

(d) the contract is not contrary to law, public order, public policy, morals or good customs, or prejudicial to a third person with a right recognized by law.

In Solgus Corporation v. CA, the Court ruled that quitclaims and waivers should be carefully examined and strictly scrutinized with regard not only to the words and terms used, but also to the factual circumstances under which they have been executed.

The burden rests on the employer to prove that the quitclaim constitutes a credible and reasonable settlement of what an employee is entitled to recover, and that the one accomplishing it has done so voluntarily and with a full understanding of its import.

A quitclaim is invalid or contrary to public policy only: (1) where there is clear proof that the waiver was wrangled from an unsuspecting or gullible person; or (2) where the terms of settlement are unconscionable on their face. In instances of invalid quitclaims, the law steps in to annul the questionable waiver.

Indeed, there are legitimate waivers that represent the voluntary and reasonable settlements of laborers’ claims that should be respected by the Court as the law between the parties.

Where the party has voluntarily made the waiver, with a full understanding of its terms as well as its consequences, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking, and may not later be disowned simply because of a change of mind. (To be continued)

For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.