A party to a conditional contract may waive a condition which is solely for that party’s benefit provided it is severable from the contract. However, the waiver cannot revive the contract if notice has already been given to terminate it.

Contracts for the sale of property are often made subject to a condition, such as the grant of planning permission or obtaining landlord’s consent for the assignment of a lease. Ideally the contract should specify whether either party may waive the condition and the effect of such a waiver on other contract provisions such as a right to terminate. In a recent case the High Court had to decide how those questions should be resolved where the contract was silent on the point.

The case concerned the sale of a flat. The lease plan had accidentally been transposed with that of an adjoining flat and the contract provided for the sale to be completed 14 days after the seller provided a deed of variation to correct the plan and an official copy of the register with an amended filed plan. In the meantime the buyer was allowed to move into the flat, but the contract provided that if, having used all reasonable endeavours, the seller was not able to provide those documents by a certain date, then either party could give five working days’ notice to terminate the contract.

The seller was unable to provide the documents in time and gave notice to terminate the contract but the buyer waived the requirement to provide the documents and insisted that the seller complete the sale. The seller claimed that the buyer had no right to waive the condition and applied for a declaration that the contract had been validly terminated.

It is established law that a party to a contract may waive a condition which is solely for that party’s benefit and which is severable from the remainder of the contract. In this case the judge said there was no doubt that the condition was for the exclusive benefit of the buyer. It was akin to a term stating what title the seller must give.

The seller argued that the condition was not severable from the remainder of the contract because the completion date was fixed by reference to the date on which the condition was satisfied so without the condition there was no completion date. The judge did not agree. If the condition was waived there would be no difficulty in arriving at a completion date. The contract would either be treated as if the condition had been performed, so that the completion date would be 14 days after the waiver, or as if the condition was deleted, in which case the court would specify the completion date, which in this case would probably be 14 days after the condition was waived.

The judge also rejected the argument that the mutual termination right was inconsistent with the condition being for the sole benefit of the buyer.

However, applying a recent Court of Appeal decision, the judge held that the waiver of the condition could not revive the contract once notice had been given to terminate it. The seller’s notice did not give a final five working days for the condition to be satisfied failing which the contract would end. The notice had the effect of terminating the parties’ contractual obligations immediately but gave five working days for the buyer to vacate the property and the seller to return the deposit.

So although the condition was validly waived, the contract was still terminated and the seller was not obliged to complete the sale.

The lesson is to ensure that the contract makes clear the circumstances in which a condition may be waived and the effect of the waiver on a termination

admin
6 September 2012

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What does waiver mean in contract law?

Waiver can be defined as a voluntary relinquishment of legal rights that a person or organisation would normally have if the waiver did not exists.  Although waiver is commonly referred to in contract law and particularly is a concept often related to breach of contract, it is a broad term which is applicable in other areas of law too.

What are some examples of waiver?

There are many.  In the context of contract law, typical examples of waiver might include losing the right to insist on goods that are exactly as described; losing the right to see a particular set of terms enforced in a contract; receiving payment in a form that was different to the form originally intended i.e. cheque instead of credit card.

How does a waiver come into existence?

For a waiver to come into existence, the person who forfeits legal rights must do so in an informed way, without duress and through words (verbal and written) or through conduct implying a waiver has come into existence.

What is waiver by election?

Waiver by election occurs where a person or organisation makes a choice between several rights (for example, choice of remedies) and communicates that choice through their conduct or words.  The conduct and words must be of such a nature that it is unequivocal that the party has chosen to exercise one right and abandon another.

What are waiver clauses?

Whether an action or inaction constitutes a waiver often creates uncertainty, especially where the waiver comes into existence by spoken word or even conduct.  To overcome this drawback, waiver clauses can be inserted into contracts to govern the way in which waiver works.  In fixed-term employment contracts, for example, some employers may try to insert waiver clauses to prevent employees claiming unfair dismissal if their contract is not renewed.  However, such clauses may only be valid where the contract of employment is for one year or longer.

What is the difference between waiver and variation?

Waiver does not actually vary the terms of a contract whereas variation does.  Variation, however, requires a much more formal approach than waiver – all the usual rules of forming a valid contract need to be followed, that is an offer to vary terms, acceptance of the offer, consideration (a legal term, but will usually be in the form of money) and intention of both parties for the variation to be legally binding.

What is the difference between waiver and estoppel?

In estoppel, one party represents to the other that it will not exercise certain legal rights.  The party that is represented to relies on this being the case.  The key differences are in the concepts of reliance and detriment.  In waiver, one party does not have to rely on a waiver by the other and suffer if the other party does not do as they said.  In estoppel, one party relies on the representation and the party making the representation is ‘es