Update that Boilerplate! California Civil Code Section 1542 Amendments Affect Waiver of Unknown Claims
By: Nicole Ambrosetti
The California Legislature has amended Civil Code section 1542, a statute which precludes the waiver of unknown claims unless express waiver language is included in the parties’ agreement. The changes aren’t substantive: California Senate Bill No. 1431, which prompted the amendments, notes these “are declaratory of existing law.”
Any documents with a Section 1542 waiver — such as settlement and severance agreements — must be updated to reflect the current language:
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.
Effective January 1, 2019, the language now includes “a releasing party,” and “released party.” The new language also reflects minor grammatical changes, such as replacing “must have materially affected” to “would have materially affected” the releasing party/creditor’s agreement to settle.
Both litigators and transactional attorneys will want to ensure the new language is included in any documents with a settlement release, including not only settlements themselves, but also contractual amendments and new deals.