What is the significance of the parties understanding the consequence of waiving California Civil Code Section 1542 in the Belocal Transfer Agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
[c. The parties to this Transfer Agreement expressly waive and relinquish all rights and
benefits which any of them may now have or in the future have under and by virtue of California Civil Code Section 1542. Each party does so understanding the significance and consequence of such specific waiver. Section 1542 provides that "[a] general release does not extend to claims which the creditor does not know or suspect exist in his favor at the time of executing the release, which is known by him must have materially affected his settlement with the debtor." For the purpose of implementing a general release and discharge as described in Sections 5.a. and 5.b., above, each party hereto expressly acknowledges that this Transfer Agreement is intended to include in its effect, without limitation, all claims described in Sections 5.a. and 5.b. above, which the parties do not know or suspect to exist in their favor at the time of execution hereof, and that this Transfer Agreement contemplates the extinguishment of any such claims.]
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the waiver of California Civil Code Section 1542 in the Transfer Agreement is a significant legal matter that requires the parties' explicit understanding. This section of the California Civil Code protects individuals from unintentionally releasing claims they are unaware of at the time of signing a release. Specifically, Section 1542 states that a general release does not apply to claims the creditor doesn't know or suspect exist in their favor when executing the release, and which, if known, would have significantly affected their settlement with the debtor.
For a Belocal franchisee, waiving this protection means they are agreeing to release all claims, including those they might not be aware of, against the other party. The FDD emphasizes that each party must understand the significance and consequence of this waiver. This acknowledgement is crucial because it demonstrates that the parties are knowingly giving up their rights to pursue future claims, even if those claims are currently unknown.
Belocal includes this waiver to ensure a clean break and prevent future litigation arising from unknown issues related to the transfer. However, it places a significant burden on the franchisee to conduct thorough due diligence before signing the Transfer Agreement. It is highly recommended that franchisees consult with an attorney to fully understand the implications of waiving their rights under California Civil Code Section 1542, as this waiver could have long-term legal and financial consequences.