Going back to 1872, California Civil Code section 1542 has held that "A general release does not extend to claims that the creditor does not know or suspect to exist. . . ." Case law going back many years establishes that this provision applies not just to monetary claims, but to workers' compensation, personal injury employment and just about all other cases. Most significantly, also for many years, in releases and settlement agreements, the releasing party almost always explicitly waives this provision, typically with a precise quotation of the statute followed by language along the lines of "Plaintiff acknowledges that she has read this Civil Code Section and understands it. Claimant waives all rights and benefits which she may now have or may have in the future under this Section."
Last summer, the legislature passed Senate Bill 1431, and it was signed by Brown. The Bill took effect on January 1 of this year, and modifies the language of section 1542. A red-lined showing of the changes is as follows:
A general release does not extend to the claims which 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, which if known by him or her, must would have materially affected his or her settlement with the debtor or released party.
It seems fairly clear that the purpose of this is to avoid confusion as to parties, particularly self-represented, who might not understand that the terms "creditor" and "debtor" applied to everyone in litigation. But most importantly is the fact that when the statute is quoted in releases and settlement agreements, the updated version of the statute must be used.
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