What is a California Release Provision?
The term “California Release” is a reference to California Civil Code § 1542. This section is intended to protect a party from releasing potential liability claims that it does not know exist at the time of executing a release agreement.
Under California law, a “general release” of claims releases the parties from all mutual obligations and all known claims. The language of § 1542 notably states that a general release does not extend to unknown or suspected claims. This means that if one party violated an agreement, but the other party does not find out about the violation until after the agreement has been dissolved, the injured party can still bring a claim and file a lawsuit.
Thus, to be completely protected, the language of the release agreement must include release of liability from all claims, known or unknown, from the beginning of time until the execution of the release agreement. This language is known as a California Release.
When Do You Need a California Release?
When you want to end a contract, a release and settlement agreement needs to be in writing and signed to ensure that each party no longer has obligations to one another. A release and settlement agreement is the official ending of a contractual relationship.
Including the language of a California Release will guarantee that the other party to the release agreement will not be able to file a lawsuit against you for claims arising out of the contract that was dissolved by the release agreement. For example, if you sign a release agreement with California Release language to sever a contractual relationship and later find out that the other party violated the contracted, you will not be able to sue them for breach of contract.
Should I Sign a § 1542 Waiver?
It depends. If you suspect that the other party or parties to the release agreement may have violated the initial contract, then you should not sign a release agreement with California Release language if you intend to sue for breach of contract.
On the other hand, if you want to completely walk away from a contractual relationship and have no intention of filing a lawsuit against the other party in the future, it is best to include California Release language in the release agreement.
Mutual Release Agreements
If you are severing a business relationship, it is usually best to include this California Release language, regardless of the state the release and settlement agreement is being executed. The inclusion of the language would protect you from claims the other party may have against you that you are unaware of.
Does a California Release Waive Future Claims?
A California Release does not waive future claims. This means that if two parties dissolve an agreement, then subsequently create another agreement, any claims arising from the second agreement are not barred by the dissolution and release of liability from the first agreement.
