Quitclaims

ONE legal document that is often signed but rarely understood is the quitclaim.

A quitclaim is signed to ensure that the signing party is foregoing or waiving whatever claims he or she has. As such, this is usually signed when one's employment is ended, or a partnership ends, or at any other time when a business relationship is terminated.

Most people merely sign the quitclaims because they will not get their final pay or their money/shares without it. Many do not even bother to read the contents of the quitclaim they are signing, which is not a prudent thing to do. One should always read and understand any document before they affix their signature, moreso for a quitclaim which waives a party's legal claims against another.

This lackadaisical attitude towards quitclaims has led to some Supreme Court decisions proclaiming that quitclaims can be against public policy. However, this is not true for all cases. As a general rule, quitclaims, if validly entered into, are binding on the signing party.

In the seminal case of Periquet v. NLRC, (G.R. No. 91298, 22 June 1990) the Supreme Court explained when a quitclaim is valid and when it is invalid:

"Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking."

Thus, the morale of the story is that quitclaims must be carefully read before they are signed. Furthermore they must be carefully prepared and then signed under such circumstances as to make them valid under the guidelines provided by the Supreme Court.

So if ever you are faced with a quitclaim, don't just sign it without reading it.

After all, in case of doubt, one can always consult a lawyer.

*****

Atty. Kelvin Lee is a consultant of the Siguion Reyna Montecillo & Ongsiako Law Office. The opinions expressed herein are his own. This column does not constitute legal advice nor does it create a lawyer-client relationship with any party. You can reach Kelvin at kelvinlesterlee@gmail.com
(Atty. Kelvin Lee)