This article is written by Vidhya Sumra who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

What is a Waiver?

The word “waive” means to give up a right. A waiver is an arrangement where one party to the agreement agrees to voluntarily relinquish or abandon the legal right, claim or privilege. It is an act of surrender of a legal right. A person relinquishing the legal right should have full knowledge of such rights before abandoning the same. 

Most of the agreement includes a no waiver clause which is a standard clause. The purpose of the waiver or no waiver clause in the agreement is to make sure that a party’s failure to implement its legal rights whether purposely or accidentally does not constitute a waiver of those rights or remedies for their breach. Like, a party may not strictly enforce the provision of the agreement under certain situations. For example, to accept late payments without charging any penalty or late fees, so it does not mean that the party is waiving its future rights as well in order to comply with other terms and conditions of the agreement. 

A waiver is often in written form, and the best example of a written waiver is a disclaimer, which becomes a waiver when accepted. To understand better about the waiver clause, let’s see the below example. 

Assume you have a lease agreement with a tenant for residential property. As per the agreement, the tenant should pay the rent on the 25th of every month and if the tenant is not paying the rent on time you are entitled to charge interest. Your tenant pays the rent on time for the first five months but on the sixth month, your tenant pays rent 5 days late. You decide not to charge interest because he was regular in paying the rent in the last five months and there was no other nuisance from the tenant. So, by not enforcing the right to charge interest on the late payment, you have waived your right to collect interest on the late payment. However, what if your tenant continues to delay the payment and you want to enforce the interest payment? The answer will depend on whether your lease agreement has a waiver clause or not.  

Why Use Waiver Clauses?

Usually, the right which is not always enforced is a right that will not be enforced by a court selectively.  For long-term contracts, it’s useful for both parties to be precise about what they can or cannot do under the agreement. If you are a party who is eligible to enforce a right, a waiver clause warrants that you do not unintentionally forfeit your right. Furthermore, if you are the party who would have a right enforced against you, a waiver clause will make it simpler to understand that you are expected to comply with the terms and conditions of the agreement.

Types of Waiver Clauses

In agreement, we come across many types of waiver clauses. It is important to know that they are different and what obligations they create for you.  

• No General Waivers

“A party’s failure to perform any clause or implement any rights under the agreement at any time shall not impair the party’s right to request performance, nor shall any party’s waiver of a violation be considered a waiver of any subsequent breach.”.  

This means that the party will have to inform the other party that they are waiving a particular right in order to actually waive it, but also should inform that waiving this particular right will not waive other rights. 

• Course of Dealing

“No course of dealing hereunder, nor any sole or partial exercise of any right, shall be construed as a waiver.”

This means that even if the party waives or partially waives the right once, they can still fully exercise the right in the future with the same party.  

• Written Waivers

“A waiver or non-performance of an obligation under the agreement would only be valid if it is in writing and signed by the person authorising the waiver.”

This means that unless the party puts a waiver in writing and signs that writing, the party will retain the ability to enforce the rights. 

• The Course of Dealing Waiver

“No sole or partial exercise of any right or remedy precludes the exercise of any other or possible rights or remedies.”

This means that if you waive or partially waive a right once, you can still completely exercise that right with the same group in the future. This provision does not specify how you can or cannot waive the “first” right, it simply states that waiving the first right does not imply the waiver of all other rights.

• The Complete Non-Waiver

“A failure or delay in imposing a duty or exercising a right or remedy does not mean that the obligation, right, or remedy has been waived. A waiver of a violation of one provision in the agreement does not imply a waiver of any other term in the agreement. A party’s waiver of a specific duty in one case does not prohibit the party from requiring compliance with the obligation in other circumstances.”

This “catch-all” waiver incorporates the affirmative waiver, general waiver, and course-of-dealing waiver into a single clause. 

Which Waiver Clause would be ideal in an Agreement?

It completely depends on the contract and situation. It may be beneficial for the parties not to have a comprehensive waiver clause, on the other side it would be preferable by the parties. To choose the right waiver clauses for the agreement, the party must ensure that they have a clear understanding of the agreement and reasons to choose any particular clause. 

Are Waiver Clauses Enforceable?

Unfortunately, the answer is no. Waiver clauses are not always enforceable. Even if an agreement includes a complete non-waiver clause, a court may find that the party has waived its right to enforcement if the party has demonstrated extreme behaviour. For example, the party has taken the actions taken in bad faith or a significant delay in enforcement. As a result, having a non-waiver clause in an agreement is only the first step towards protecting rights in the agreement.  

Best Practices for Incorporating Waiver Clauses in an Agreement

If the party is using waiver clauses in the agreement effectively, parties will have more flexibility or options, if the other party is breaching the contract. The parties can take full benefits of waivers from the below points:

• It’s always beneficial for the parties to know what forms of waiver clauses are included in the agreement and how they will impact the parties. 
• In the event of a breach of contract by one party, the other party must determine whether they want to waive their rights or enforce them.  
• As a non-breaching party, they should put their intention in writing and inform the breaching party about their intention to waive, reserve your right to waiver or terminate the agreement. 
• If the party chooses to reserve the right to waive, the party should make sure that ask the breaching party to sign a document and acknowledge that your decision doesn’t constitute a waiver. 

How to draft a written waiver pursuant to a no waiver clause?

As previously stated, the no-waiver clause requires any waivers to be executed in writing. So, the waiver is essentially a written declaration relinquishing a right. 

For example, when a child is going on a school trip, parents will be asked to sign a waiver agreeing that the school will not be held responsible if the child is injured while on the trip. When a parent signs a waiver, they are voluntarily relinquishing a legal right or privilege. A waiver is almost required to sign before you participate in something risky. 

Another great example is adventure sports. There is always the risk of injury while participating in adventure sports. And where there are accidents, there are lawsuits, which will result in financial loss to the adventure activity suppliers. As a result, activity suppliers go to great lengths to shield themselves and their companies from financial loss threats. So, participants are required to execute a form containing terms and conditions of participation. This agreement relieves the provider from liability for injuries resulting from the error of the activity provider. This agreement is a waiver and it’s contractual in nature and is governed by the law of contracts.  

Many people are unfamiliar with writing a waiver letter, so how do you execute a written waiver? 

To effectively draft a written waiver pursuant to the no-waiver clause duly consider the following crucial points:

• Identify the rights

Identify the rights you are relinquishing and the circumstances in which the rights are being given up. 

For example, as mentioned earlier, if it is a right to receive the rent within a certain time frame, specify that. Is the right given up only for a few months in the past or also for the future?

• Eligibility

Before you draft a written waiver or statement, you must first understand any eligibility issues. Every company that issue obligations have their definitions of eligibility, which are critical to comprehend when dealing with waiver requests. That is why you must understand the terms and conditions in order to determine if you qualify or not.

The best example in today’s scenario is the moratorium on loan during the Covid situation. The government has released guidelines for the waiver of compound interest that was payable by borrowers who opted for a moratorium on their loan equated monthly instalment. There was an eligibility criteria for waiver of interest on interest like home loan, credit card loans, education loans and other few loans where the loan amount should not exceed Rs. 2 crores were eligible under this scheme. 

• Factual Background

It is important to include a factual background of the situation in the preamble while drafting a waiver so that the purpose of the waiver is clear. It is also required to check the parent agreement and the clause requiring that waivers must be written. It would be ideal to mention that the waiver is being signed in accordance with that provision of the parent agreement. 

Example: If parties have agreed to enter into a fee waiver arrangement then parties shall include the factual background of parent agreement in recitals of the Fee Waiver Agreement like below:

“WHEREAS the Company and the Consultant have entered into the Investment Advisory Agreement dated ____; and 

WHEREAS the Company and the Consultant have agreed that it is suitable and in the best interests of the Company for the Consultant to conditionally waive certain fees under the Investment Advisory Agreement” 

• To make request

It is necessary to explain yourself clearly which is an important part of your declaration. You must begin your statement with a simple explanation of why you are making the request. 

For example, saying that you are releasing someone from a service or debt that has been paid off.

• Additional information 

It would be best to include additional information about your claim as another important aspect of how to write a waiver letter. 

Like, as part of your statement of facts, highlight and note any supporting monetary dates, locations, interested parties, and monetary figures.

• Supporting documents

When writing a letter of waiver, supporting documents are also important. You should send letters with receipts, email printouts, and copies of contracts to back up your claims and statements.

If we are asking the bank to waive late payment fees, it’s a good idea to provide documentation with the letters, such as bank statements, previous reports, and so on, to highlight your previous track record.

• No irrelevant information

Do not include any information that is not relevant to the letter of waiver or statement.  This may cause confusion about the waiver’s intent.

• Avoid long words

It is advisable not to use unnecessarily long words or phrases that are difficult to comprehend for the majority of people. Using plain, concise, and straightforward English will be suitable.

• Acknowledgment 

Ensure that the other party has read the waiver clause and acknowledges it by placing its signature on it. It would be better to include a line that the party waiving its rights has read the clause and is fully aware of the repercussions of the waiver. This will preclude the party from waiving its rights from claiming that it signed the waiver without having a substantive understating of the clause. 

To receive an acknowledgment, it is advisable to make a counterpart of the letter and obtain the signature of the other party. 

• Notary

It would also be appropriate for you to notarize the waiver, which verifies that the notary, who is a public officer, saw or witnessed the other party signing the papers and prohibits the party from claiming that they did not sign the agreement. 

For instance, 

“I certify that I have read and fully comprehend the contents of this document. I understand that signing this document is a contractual release from exercising my rights in relation to the subject matter stated in it and that I am signing it voluntarily.”

A sample waiver is provided below:

“I hereby release and forever discharge and hold harmless (insert the defaulting party’s name) and its successors and assign from any and all liability, claims, as well as demands of whatever kind or nature, in either law or equity, that arise or may hereafter arise from any deviation in the mechanism in which payments due under the contract were made from ____ to _____”. 

Conclusion

A waiver is a legally binding agreement that allows you or another party to amend or relinquish a right, privilege, or claim. The agreement can be a stand-alone document, such as when you sign a waiver form, or it can be incorporated into a contract as a waiver clause. We need to ensure that the waiver is legally enforceable. 

References

1. https://www.invigorlaw.com/understanding-contract-terms-post-12-waiver- clause/#:~:text=The%20Written%20Waiver,ability%20to%20enforce%20your%20rights.
2. https://medium.com/@SophiaWL/how-to-write-a-waiver-statement-in-7-easy-steps-596c3aef6fe9

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