49 No waiver

Desired result

“No waiver” clauses are curious creatures. They endeavor to preserve parties’ ability to enforce their rights under an agreement even if a given party inadvertently or for some time period fails to take enforcement action.

Imagine, for instance, that Party B’s payment to Party A is always due on the first of the month. One month, Party B pays late and Party A accepts the late payment. For Party A, an effective “no waiver” clause would be the equivalent of saying:  “Dear Party B: Just because we accepted your late payment once, that doesn’t mean you can pay late again, and it also doesn’t mean that we won’t seek damages for your failure to pay late even though we accepted late payment.”

This may sound logical but these clauses are enforced to varying degrees and differently across jurisdictions. Some courts look at a prolonged or repeated failure to enforce one’s rights as a “waiver” of that “no waiver” clause! This is in part based on equity, because it would be unfair (using our example above) for Party A to lead Party B to believe repeatedly or for months on end that late payments are accepted, and allow Party B to take action in reliance on that belief, then suddenly unleash a flurry of repercussions.

Does this mean that “no waiver” clauses are irrelevant? No, just that they should be carefully crafted (as discussed below) if you want the best shot at preserving your rights in the event of an occasional oversight or failure to act. Consider making the clauses specific enough to:

• Preclude waivers made orally
• Preclude waivers in one instance from being deemed extended to subsequent instances
• Preclude delay or course of dealing from being treated as a waiver
• Authorize retraction of waivers once granted

Will all of this work to prevent a waiver of the “no waiver” provision? Probably, unless your failure to enforce rights is prolonged or recurrent.

What it means

Parties use “anti-waiver” or “no waiver” clauses to preserve their rights in the event they fail to take enforcement action. A “no waiver” clause essentially provides that “no failures of either party to exercise or enforce any of its rights under this Agreement as to any promise or condition shall act as a waiver of such rights.” ^[1].

The issue is that courts vary in how they enforce such provisions. Some courts enforce the provisions strictly, upholding that they unequivocally preclude a party’s conduct from being deemed a waiver. Other courts follow a so-called “majority” rule that a “no waiver” clause may indeed be waived by the parties’ course of conduct, even if the clause expressly provides that any waivers of the “no waiver” clause must be in writing to be valid. ^[2] And where the Uniform Commercial Code (U.C.C.) is applicable, under U.C.C. §§ 1-303 and 2-209, parties’ course of performance is relevant to assessing whether a term is waived. If the course of performance is inconsistent with enforcement of the obligation, the court may find the obligation has been waived or modified.

These rules developed in part based on equity: Imagine an e-resources license agreement defines “Authorized Users” as faculty, staff, and students—but is silent on “walk-ins.” A library starts allowing walk-in users to use the licensed product, and the vendor learns of this because of unusual download activity. If the vendor has knowledge of this but takes no action, a library may reasonably believe that use by walk-ins is authorized. And if the library keeps allowing walk-in users to use the product in reliance on this belief—and the vendor continues to have knowledge of ongoing use but takes no action—a court may determine that the vendor cannot suddenly try to hold the library liable for violating the “Authorized Users” limitation. The key here is that the other party (here, the vendor) has “knowledge of the nature of the performance and opportunity for objection to it,” but “accepts the performance or acquiesces in it without objection.” ^[3]

What happens if the vendor later has a change of heart, and decides while it may have overlooked unauthorized use once it no longer wants to continue waiving enforcement of its rights? Courts applying the U.C.C. or the “majority” rule will allow a party that has made a waiver regarding performance to retract that waiver by “reasonable notification” that strict performance will henceforth be required on that issue “unless the retraction would be unjust in view of a material change of position in reliance on the waiver.” [1 Corbin on Contract Drafting § 14.03; Unif.Commercial Code § 2-209].

Desired language

From CDL Model License:

Waiver of any provision herein shall not be deemed a waiver of any other provision herein, nor shall waiver of any breach of this Agreement be construed as a continuing waiver of other breaches of the same or other provisions of this Agreement.

Westlaw’s Practical Law ^[4] recommends far greater specificity, though perhaps does not go far enough as it fails to build in retraction of waiver:

No Waiver.

1. 1. No Oral Waivers. No waiver under this Agreement is effective unless it is in writing, identified as a waiver to this Agreement, and signed by [an authorized representative of] the party waiving its right.
   2. Waiver Only for Specific Instance and Purpose. Any waiver authorized on one occasion is effective only in that instance and only for the purpose stated, and does not operate as a waiver on any future occasion.
   3. Failure, Delay, and Course of Dealing Not a Waiver. None of the following constitutes a waiver or estoppel of any right, remedy, power, privilege, or condition arising from this Agreement:
      1. any failure or delay in exercising any right, remedy, power, or privilege or in enforcing any condition under this Agreement; or
      2. any act, omission, or course of dealing between the parties.

Tricks / risk

“No waiver” clauses can be helpful, particularly if you are managing a large portfolio of agreements and resultantly are occasionally dilatory in taking action to enforce your rights under the agreement. But “no waiver” clauses are not foolproof, and thus not strictly essential: Prolonged or repetitive failure to enforce your rights in response to the other party’s non-compliance or breach may result in a waiver of the “no waiver” clause. Your safest best to give weight to the clause is to draft it carefully, and be proactive in contractual oversight by:

• When you become aware of a breach by a publisher or vendor, notifying them and preserving your rights.
• Conversely, if you have made a performance oversight, not relying on a publisher or vendor’s failure to take action as a sign that your performance was or will continue to be excused. And;
• Creating a retraction right in the “no waiver” clause, such that if you waive a breach or performance obligation once but later want to enforce it, you can retract any past waivers granted and enforce the obligation going forward.