What is this document?
A Receipt of Payment and Release of Obligations is a document confirming that a selling party has received payment from a purchasing party in a transaction. In consideration for the payment, the purchasing party releases the selling party from all future obligations.
When would I use this document?
This document would be used during the final stages of a transaction in which payment is made from one party (the purchaser) to another party (the vendor), such as in an Asset Purchase Agreement or a Share Purchase Agreement. It provides confirmation that the vendor has received payment in full and agrees to waive all future claims against and obligations of the purchaser.
Who signs this document?
The vendor will sign the Receipt of Payment and Release of Obligations. If the purchaser is required to waive any claims against or obligations of the vendor, it will be a mutual Release of Obligations and the purchaser will also be required to sign the document. If either party is a corporation or other entity, the Receipt of Payment and Release of Obligations will be signed by an authorized signing officer on behalf of the corporation or other entity.
More details about this document
Sometimes payment terms in a transactional agreement will include a promise by the purchaser to pay a certain amount according to a certain schedule. This is often accomplished through a Promissory Note. Where payment is to be made in accordance with a Promissory Note, the Receipt of Payment and Release of Obligations should be dated as of the date on which final payment is made by the purchaser.
Note that the receipt of payment does not require payment in cash. The receipt may also acknowledge payment in kind, the nature of which should be described in the Receipt of Payment and Release of Obligations.
What are the core elements of this document?
The core elements include: an acknowledgement of the Purchaser’s receipt of payment in full, a description of the payment (cash or in kind), and the releases.
The document could also contain clauses dealing with promissory notes or waivers and releases made by the purchaser.
Related Documents
- Promissory Note - a written promise to pay used to provide security for payment
- Share Purchase Agreement - an agreement for the sale of shares
- Asset Purchase Agreement - an agreement for the sale of the assets of a business
- Bill of Sale - is a legal document that records that the seller sold specific property on a specific date to the buyer. It is proof that the property was transferred from the seller to the buyer.