Waiver of Contractual Right by Conduct: How It Works and What to Watch Out For
Contracts are integral to business dealings, but sometimes the parties involved act in a manner inconsistent with the contract. This can lead to disputes regarding whether a contractual right has been waived by conduct. In this article, we’ll explore what constitutes a waiver of contractual right by conduct, how it works, and what to watch out for.
What is a Waiver of Contractual Right by Conduct?
A waiver of a contractual right occurs when one party voluntarily relinquishes a right that it is entitled to under the contract. Waiver by conduct is a legal doctrine that recognizes that a party can waive its contractual rights through its actions. For example, if a party agrees to accept a delayed payment after the due date, it may be waiving its right to demand timely payment in the future.
Waiver by conduct occurs when a party acts in a manner that is inconsistent with the enforcement of the contractual right. The conduct of the party must be unequivocal and inconsistent with the right being waived. The party’s conduct must also be in reliance on the other party’s conduct, leading the other party to believe that the first party has waived the right.
How Does Waiver of Contractual Right by Conduct Work?
The law recognizes two types of waiver by conduct: express and implied. Express waiver occurs when a party explicitly states that it is waiving a particular right. Implied waiver, however, is less clear-cut and requires the court to determine whether the party’s conduct was inconsistent with the right being waived.
For example, suppose a contract requires a party to provide written notice of any breach of contract within five days. If the party fails to provide written notice but continues business dealings with the breaching party, it may be implied that the first party waived its right to written notice.
What to Watch Out For
Waiver by conduct can be dangerous because it may occur unintentionally. A party may act inconsistently with its contractual rights without realizing that it is waiving them. It is crucial, therefore, to carefully review and understand the contract’s terms to avoid unintentional waiver.
Contractual rights should only be waived intentionally and with full knowledge of the consequences. Parties should also be mindful of their actions and communicate their intentions clearly. For example, if a party decides to accept a late payment, it should notify the other party that it is doing so explicitly and in writing.
Waiver of contractual right by conduct is a legal doctrine that allows a party to waive its contractual rights through its actions. Waivers can occur expressly or implicitly, and parties must be careful not to unintentionally waive their rights. Parties should review the contract’s terms carefully and communicate their intentions clearly to avoid unintentional waiver.