The Settlement Agreement and Release: What a Civil Code Section 1542 Waiver Gives Up

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

Civil Code section 1542 provides that a general release does not extend to claims the releasing party does not know or suspect to exist when signing, if knowing of them would have materially affected the settlement. Waiving section 1542 removes that protection. You release the claims you have never heard of along with the ones you have. California courts enforce a clear waiver. Kolmogorov Law, P.C. negotiates and litigates settlement agreements for businesses in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss a settlement agreement before you sign it.

What a release does

A release ends an obligation. Under the Civil Code, an obligation is extinguished by a release given to the released party by the releasing party, upon new consideration, or in writing with or without new consideration. (Civ. Code, § 1541.) Once it is signed and effective, the claim is gone.

Releases come in two sizes. A specific release covers a defined dispute: this invoice, this project, this lawsuit. A general release is written to cover every claim the releasing party has against the other side, usually "from the beginning of time" to the signing date. Most drafts start general. Whether yours stays that way is negotiable.

What section 1542 says and what the waiver gives up

The statute is one sentence. A general release does not extend to claims that the releasing party does not know or suspect to exist in his or her favor when signing and that, if known, would have materially affected the settlement. (Civ. Code, § 1542.) It protects people from signing away claims by accident.

The waiver reverses that default. A typical clause quotes the statute and then states that the parties waive it. California courts have enforced such waivers against later-discovered claims where the agreement shows the party understood what it was giving up, particularly on the advice of counsel. That is why the clause is usually set apart and written in plain terms.

Consider a distributor that settles an invoice dispute with a supplier and signs a general release with the waiver. Six months later it learns the supplier had been selling into its exclusive territory for years. That claim existed on the signing date. It was unknown. Unless the release itself can be set aside, it is probably gone.

When to narrow the release or resist the waiver

A defendant paying money wants peace, and a full waiver is a fair price in many cases. I recommend it when the parties are ending their relationship and nothing else is pending between them.

It deserves a second look in three situations. The parties will keep doing business. The facts are not fully known, as with products still in the field or royalty reports not yet audited. Or one side has far better information than the other.

Limit the release to claims arising from the dispute. Carve out obligations created by the settlement agreement itself, along with any indemnity or warranty that should survive. Make the release mutual, so both sides give up the same things. A related doctrine, covered on our page about accord and satisfaction, applies when a debt is settled by a "paid in full" payment instead of a signed agreement.

Who is released

Read the definition of "released parties." Drafts often sweep in parents, subsidiaries, officers, owners, insurers, and successors. That can release a person you intended to pursue next.

The defaults matter when the agreement is silent. A release of one of two or more joint debtors does not extinguish the obligations of the others, unless they are mere guarantors. (Civ. Code, § 1543.) A second rule covers a good-faith release given, before verdict or judgment, to one of several tortfeasors claimed liable for the same tort, or to a co-obligor mutually subject to contribution rights. It does not discharge the others unless its terms so provide, though it reduces the claims against them. (Code Civ. Proc., § 877, subd. (a).) If a guarantor or co-obligor remains on the hook, the agreement should say so by name.

What a release and its side terms cannot do

A release looks backward. A clause that tries to excuse a party in advance from its own fraud, willful injury, or violation of law is against the policy of the law. (Civ. Code, § 1668.)

Confidentiality and non-disparagement terms have limits too. In settlements of filed claims involving sexual harassment or workplace harassment, discrimination, or retaliation, a provision restricting disclosure of the underlying facts is generally void. The claimant may ask to have his or her identity shielded, unless a government agency or public official is a party, and the amount paid may remain confidential. (Code Civ. Proc., § 1001, subds. (a), (c), (d), (e).) In an ordinary commercial settlement the parties have more freedom. The clause should still say who may be told (accountants, lawyers, lenders, a court) and what happens after a breach. A fixed sum for each violation must be reasonable, as our page on liquidated damages explains.

Payment over time and the court's power to enforce

A settlement paid in installments is a loan to the other side. The agreement should state the dates, a cure period, and what a missed payment triggers.

The usual trigger is a stipulated judgment that the creditor holds and files only on default. Size it carefully. A liquidated damages provision is valid unless it was unreasonable under the circumstances when the contract was made. (Civ. Code, § 1671, subd. (b).) California courts have refused to enforce a stipulated judgment for several times the settlement amount, treating it as a penalty unrelated to the harm a missed payment causes. Our page on confessions of judgment covers a related device and its limits.

If a lawsuit is pending, ask the court to keep jurisdiction. On a stipulation by the parties or their counsel, the court may dismiss the case and retain jurisdiction to enforce the settlement until it is fully performed. (Code Civ. Proc., § 664.6, subd. (a).) Our page on enforcing settlement agreements explains the motion. A written deal signed at mediation should also state that it is enforceable, binding, or admissible, so that mediation confidentiality does not keep it out of court. Our civil litigation practice page describes how we handle the case around the settlement.

What to bring to the first meeting

The draft settlement agreement, with any redlines exchanged so far.
The contract or complaint that started the dispute.
A list of every other dealing, account, or project between the parties.
Any guaranty, insurance policy, or indemnity agreement tied to the claim.
The payment terms you can accept, or can afford.

Frequently asked questions

The settlement agreement asks me to waive Civil Code section 1542. What am I giving up?

You are giving up claims you do not know about. Section 1542 of the California Civil Code says a general release does not reach claims the releasing party does not know or suspect to exist, if knowing of them would have materially affected the settlement. A waiver removes that limit, so the release covers unknown claims that existed on the signing date.

I signed a general release last year and just discovered a new problem. Can I still sue?

It depends on the release and on when the claim arose. If the agreement was a general release with a clear section 1542 waiver, California courts will usually treat a claim that existed on the signing date as released, even though you did not know of it. Claims based on conduct after the signing date, and claims the agreement carved out, are generally not covered.

What is a 1542 waiver?

It is a clause in a California release stating that the parties waive the protection of Civil Code section 1542. Without the clause, a general release does not extend to unknown claims that would have materially affected the settlement. With it, unknown claims are released along with known ones. The clause typically quotes the statute so there is no doubt the party read it.

Does a release cover the company's owners and affiliates?

Only if the agreement says so, or the law supplies the answer. Settlement agreements usually define the released parties to include affiliates, officers, owners, and successors. Where the agreement is silent, California Civil Code section 1543 provides that releasing one joint debtor does not extinguish the obligations of the others, unless they are mere guarantors. Name everyone you intend to release, and everyone you do not.

Can a settlement agreement be enforced without filing a new lawsuit?

Often, yes. If the settlement resolves a pending California case and the parties stipulate in a signed writing or on the record, Code of Civil Procedure section 664.6 lets the court enter judgment on the settlement by motion. The parties may also ask the court to retain jurisdiction after dismissal until the settlement is fully performed.

Talk to a California business litigation attorney

If you have a settlement draft in front of you, call (909) 235-6116 or contact us online before it is signed. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the wording of the release, the facts, and the court.