Time to Update your Civil Code Section 1542: General Release - Danielle R. Stephens

Time to Update your Civil Code Section 1542: General Release - Danielle R. Stephens

Danielle R. Stephens

If you are relying on a Civil Code Section 1542 waiver in your settlement agreement or other documents to ensure that the releasing party releases any unknown claims against you or your client, you need to make sure that it has been modified to include the revisions set forth in California’s Senate Bill No. 1431, which went into effect on January 1, 2019.

The prior version of the statute read: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

Senate Bill No. 1431 amended Civil Code Section 1542 to now read: “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.”

SB 1431 was drafted to clarify that the release in Section 1542 is not limited to monetary claims, which one might expect when reading the terms “creditor” and “debtor”.

As for the change from “must have materially affected” to “would have materially affected”, the impact has yet to be seen, but it could be argued that “would have materially affected” is a lesser standard than “must have materially affected” so . . .  change that Civil Code Section 1542 General Release language in your document now.

For more information about recent updates in the law, contact Danielle Stephens at dstephens@diepenbrock.com or (916)492-5016.