When parties reach a settlement, they expect finality. But as the British Columbia Court of Appeal (the “Court” or the “Court of Appeal”) recently confirmed in Chan v. Chan (2025 BCCA 262), silence in a settlement agreement can be risky.
The Court found that where a settlement is intended to end a dispute entirely, a mutual release may be implied—even if the parties never put it in writing. The decision underscores a simple but important drafting lesson: if you intend to preserve certain claims or limit the release to one direction, say so expressly. Otherwise, the law may assume you intended to release—and be released from—everything connected to the dispute.
What led to the dispute in Chan v. Chan?
The case arose from a family property dispute in Richmond, British Columbia. A mother and son applied under the Partition of Property Act to sell a jointly owned property and divide the proceeds with the daughter, who co-owned the other half. Before the matter went to court, they reached a settlement: the daughter would purchase the mother and son’s interest for $420,000.
The written agreement was short and silent on releases. When closing approached, that silence became a problem. The daughter expected a unilateral release—she would pay, and the other side would release any claims against her. The son, acting as executor of his late mother’s estate, insisted on a mutual release so both sides could walk away from the dispute cleanly. Neither side would complete the deal, and each accused the other of repudiating the agreement.
When does the law imply a mutual release in a settlement?
Both the British Columbia Supreme Court and the Court of Appeal agreed that the settlement carried an implied term requiring mutual releases of all matters raised in the proceeding.
The Court reaffirmed a well-established principle: when parties settle active litigation with the intention of ending it once and for all, a promise to exchange mutual releases is usually implied. That implication flows naturally from the very purpose of settlement—to bring finality.
In this case, the Court found that the parties’ communications and the scope of the petition demonstrated a shared intention to resolve every issue raised in the proceeding, including claims for occupational rent and costs. The implied release therefore covered all issues in that case but did not extend to the daughter’s separate “Trust Action,” which was commenced after the settlement.
The Court drew a clear boundary: an implied release covers only the dispute being settled, not other or future claims between the same parties.
Did either party repudiate the settlement agreement?
The trial judge found that the daughter’s refusal to provide a mutual release amounted to repudiation of the agreement. The Court of Appeal disagreed.
The Court emphasized that repudiation requires a clear and unequivocal unwillingness to be bound by the contract. In this case, both sides insisted on terms that went beyond the agreement’s implied content: the daughter demanded a unilateral release, while the son insisted on additional undertakings tied to the mutual release. Because neither party was ready and willing to perform on the true terms of the agreement, neither could claim that the other had repudiated it. The settlement therefore remained binding.
How to avoid disputes over settlement terms
For business owners, Chan v. Chan highlights how easily settlement terms can be misunderstood or left open to interpretation. Courts may fill in missing terms to make a settlement enforceable— and those implied terms may go further than anyone intended.
When finality is the goal, precision is essential. A well-drafted settlement should leave nothing to implication—not the scope of the release, not the timing of performance, and not the form of the documents to be exchanged.
Six drafting lessons from Chan v. Chan
The following are key takeaways from the Court of Appeal’s decision, which businesses should consider when entering into any negotiated resolution:
- Explicitly Include All Material Terms: Settlement agreements should expressly set out all material terms, including whether releases are required and their precise scope. Avoid leaving critical elements to implication or future negotiation.
- Clearly Delineate the Scope of Releases: If a release forms part of the settlement, define exactly what claims, actions, and parties it covers, and specify any claims intended to survive.
- Specify Mutual Versus Unilateral Releases: If a release is required, clearly state whether it is mutual or one-sided. In Chan v. Chan, the Court of Appeal upheld the finding that a mutual release was implied, even though one party had sought a unilateral release. Ambiguity on this point can lead to costly delays and further litigation.
- Set Clear Performance Obligations and Conditions: If the intention is for a release to be executed before another obligation—such as payment or transfer of property—make that sequence explicit in the agreement.
- Remember That Repudiation Is a High Bar: Disagreements over documentation following a settlement rarely amount to repudiation. A party alleging repudiation must show a clear unwillingness by the other party to be bound. As Chan v. Chan demonstrates, when both sides insist on new or expanded terms, neither can successfully claim the other has repudiated the deal.
- Draft Ancillary Documents Early: If specific forms—such as releases, transfer forms, or undertakings—will be required to complete the settlement, attach them as schedules or outline a clear process and timeline for finalization. This proactive approach reduces uncertainty and prevents subsequent disputes over form and content.
Should you have questions about how the principles in Chan v. Chan may impact your business or current practices, or if you require assistance in resolving a dispute, please do not hesitate to contact a member of Miller Thomson’s Commercial Litigation Group.
