Waiver of contractual right: Overview, definition, and example
What is a waiver of contractual right?
A waiver of contractual right refers to the voluntary relinquishment or abandonment of a legal right or claim within a contract by one of the parties. In the context of contracts, a waiver typically means that a party has decided not to enforce a specific right, condition, or provision that they are otherwise entitled to under the agreement. Waivers can apply to a wide range of rights, such as the right to sue for breach, the right to terminate the contract, or the right to demand specific performance. A waiver can be express (explicitly stated) or implied (based on actions or lack of actions that suggest an intention to forgo the right).
For example, if a party to a contract delays in exercising a right (like demanding performance or terminating the agreement), they might be seen as waiving that right by their inaction.
Why is a waiver of contractual right important?
A waiver of contractual right is important because it allows the parties to a contract to maintain flexibility in managing their relationships and obligations. By waiving certain rights, a party may choose to overlook a breach, extend deadlines, or continue performance under modified terms. Waivers can help preserve business relationships, avoid legal action, and allow for resolution of minor issues without formal proceedings.
However, waivers can have significant legal consequences. If a right is waived, it may no longer be enforceable in the future, so it is crucial for parties to carefully consider the potential impacts before deciding to waive a right. Additionally, waivers must be clear and explicit to avoid confusion or misunderstanding.
Understanding waiver of contractual right through an example
Imagine a supplier and a retailer have a contract stipulating that the retailer must make payments within 30 days of receiving goods. The supplier has the right to terminate the contract if payments are not made within the specified time. However, after the 30-day deadline passes, the supplier continues to deliver goods and accepts late payments from the retailer. By continuing to deliver goods and accept late payments without taking action, the supplier may be seen as waiving the right to terminate the contract due to the late payments, as they did not enforce this provision within the agreed timeframe.
In another example, a software development company has a contract with a client that includes a clause specifying that the client must report any bugs within 15 days. After receiving the software, the client notices bugs but does not report them within the 15-day window. By failing to report the bugs within the required period, the client may be seen as waiving their right to request bug fixes under the terms of the contract, as they did not act within the designated timeframe.
An example of a waiver of contractual right clause
Here’s how a waiver of contractual right clause might appear in an agreement:
“No delay or failure by either Party to exercise any right or remedy under this Agreement shall be deemed a waiver of that right or remedy. A waiver of any right or remedy must be expressly stated in writing and signed by the Party waiving the right.”
Conclusion
A waiver of contractual right is a significant legal concept that involves voluntarily giving up or foregoing a right within a contract. It allows flexibility in business relationships, helping parties address issues without formal enforcement, but it also carries legal risks. A clear understanding of waivers is important, as once a right is waived, it may not be enforceable in the future. Contracts should include precise language about waivers to avoid misunderstandings and ensure that all parties understand the consequences of relinquishing rights.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.