Implicitly Waiving Contract Rights
American contract law has a complex relationship with formalities, such as signatures and notarization. One the one hand, people use these formalities all the time. When most people think of a contract, they think of a long legal document with a signature page at the end. These formalities are important because they are evidence of the parties’ intent and what they agreed to. Yet, at the same time contract law does not require those formalities to create a binding contract. As long as there has been an offer, exchange, and acceptance, the law will consider it a binding contract in most circumstances. In fact, there are even situations where the law will enforce oral agreements, if the party seeking enforcement can prove it took place. This lack of focus on the importance of formalities can create a particular problem for business in the case of waiver of contractual rights.
Waiver in General
A waiver of contract rights is a conscious decision by a company to give up a right or privilege provided by a contact. In order to waive a contract right, Florida law requires three things. First, the contractual right must exist at the time the person wants to waive it. Second, the person or business must have knowledge of the right. Third, the person or business must have an intention to waive the right.
The problem with waiver arises as the last prong of the test. Contract law operates on an objective basis, meaning that it is a person’s outward actions that matter for the purpose of judging intention. This objective basis, combined with a lack of need for formalities, means that people can waive their contract rights by simply not enforcing them. Simply delaying enforcement is not enough, but a course of conduct that makes it appear as though a person has chosen not to enforce the right can constitute an intention to waive the right.
This course of conduct waiver can be a serious problem, especially for businesses with many contracts because it can be difficult to keep track of all the different rights. This can lead to companies accidentally waiving rights that they had intended to enforce. However, there is a countermeasure that companies can put in place to solve this problem, the anti-waiver provision.
Anti-Waiver provisions are clauses in contracts that memorialize the parties’ agreement that mere failure to enforce a right does not result in a waiver of that right. For example, suppose that a landlord had failed to collect rent for several months. Without an anti-waiver provision, the tenant could argue that the landlord had waived the right to collect rent based on the prior conduct. With the anti-waiver provision, the landlord has a shield to prevent the waiver and ensure that they can actually collect on the debt.
Contract disputes can involve a variety of subtle doctrines. If you are currently involved in a contract dispute and think that there may be an issue of waiver, contact a West Palm Beach business dispute attorney at Pike & Lustig, LLP today.