Under existing law, an obligation is a legal duty to do or not to do a certain thing and an obligation may be extinguished in various ways. An obligation is extinguished if a creditor releases a debtor from the obligation either upon new consideration or in writing, with or without new consideration. Under existing law, a general release from an obligation does not apply to claims that the creditor does not know or suspect to exist in his or her favor, as specified, and that would have materially affected his or her settlement with the debtor.

This bill would clarify that the terms “creditor” and “debtor” as used in the above provisions include “releasing party” and “released party,” respectively. This bill would state that its changes are declaratory of existing law.