California Civil Code Section 1542 precludes the waiver of unknown claims unless the protections of the section are expressly relinquished. In order to effectively waive the protections of California Civil Code Section 1542, the language of the statute must be included in any agreement, and the parties to the agreement must acknowledge that they are waiving the rights and benefits of the statute.

Indeed, it is the peace provided by such releases that often makes settlement possible.Then there is California Civil Code § 1542. It provides: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.

If so, then the settlement agreement should explicitly release all known and unknown claims. A general release of claims is not always sufficient to release claims that were unknown at the time of settlement.For example, California Civil Code Section 1542 provides that a general release of claims does not extend to claims that the releasing party “does not know or suspect to exist” at the time of the release and that, if known, “would have materially affected” the settlement. If your settlement agreement is governed by California law or has another nexus to California, a provision stating that the parties agree to waive Section 1542 must be included in order to release unknown claims.3. Who should be covered by the settlement agreement?Normally, the parties to a settlement agreement would be the parties to the contracts at issue or the parties to the pending litigation or arbitration.

Indeed, it is the peace provided by such releases that often makes settlement possible. Then there is California Civil Code § 1542. It provides: 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.

claims expressly preserved herein.Each Settling Party acknowledges and understands that there is a risk that subsequent to the Effective Date of this Settlement Agreement, each Settling Party may discover, incur or suffer released claims that were unknown or unanticipated at the time of the Effective Date of this Settlement Agreement, and which, if known on the Effective Date …, might have materially affected each Settling Party's decision to enter into and execute this Settlement Agreement. Each Settling Party … is assuming the risk of such unknown released claims and agrees that this Agreement applies thereto.Without in any way limiting any other provisions of this Settlement Agreement, each Settling Party hereby covenants not to sue or to assert, prosecute, or maintain, directly or indirectly, in any form, any claims released by it pursuant to the releases included herein. Additional counts include 1) breach of contract (nonsolicitation) and 2) breach of contract (confidentiality). CA Civ Code § 1542 (2022) ("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.").Cadence Design Systems, Inc. v. Avant! Corp., 57 P.3d 647, 654 (2002) ("a plaintiff's claim for misappropriation of a trade secret against a defendant arises only once, when the trade secret is initially misappropriated, and each subsequent use or disclosure of the secret augments the initial claim rather than arises as a separate claim.").Cypress Semiconductor Corp. v. Superior Court, 163 Cal.App.4th 575, 583 (6th Dist. 2008) ("In our view, a plaintiff may have more than one claim for misappropriation, each with its own statute of limitations, when more than one defendant is involved.").

A settlement agreement always includes monetary and/or non-monetary consideration provided to the claimant to settle known claims against the business. Under California Civil Code section 1542, a claimant may also agree to waive the right to bring claims for potential violations of claims in existence at the time of the settlement that the claimant is not aware of when settling.Resignation. A settlement agreement may include non-monetary consideration including requiring a current employee to resign from a job.Confidentiality.

Of growing concern to judges is whether the settlement includes a California Civil Code section 1542 waiver.What Is a California Civil Code Section 1542 Waiver? California Civil Code section 1542 is a statutory protection for parties who sign a settlement agreement containing a general release of claims. It provides that a general release of claims does not extend to claims that the releasing party does not “know or suspect to exist” at the time of executing the release, and which if known “must have materially affected” the settlement.

You should also be aware of any statutes that preserve claims. For example, California Civil Code section 1542 provides: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. Failure to expressly waive this section in the settlement agreement presents a potential problem if there was an intention to release all claims, known and unknown.

Settlements induced by fraud can be set aside then because the defrauded party has not freely bargained, but instead has been induced to settle by affirmative misrepresentations by the other party. So too, broad releases included in settlement agreements, such as those made under California Civil Code Section 1542, may be set aside if induced by a party’s extrinsic fraud. This is in keeping with California Civil Code Section 1668, which finds void against policy of law those contracts which seek to exempt a party from responsibility for their own fraud.

However, no template can possibly foresee all the terms that the parties may want or need. At bare minimum, it must contain a waiver of California Civil Code section 1542 (assuming the parties wish to dispose of “all” claims, both known and unknown). Further, settlements are often arrived at after hours of negotiation.