An important clause in commercial agreements.
May 07, 2017
This article appeared in the May 2017 issue of Club Life.
I recently wrote about “Entire Agreement” clauses, a common clause found in the types of commercial agreements entered into by clubs.
This article considers another common clause in commercial agreements – the “No Waiver” clause.
Waiver of Rights
No Waiver clauses are relevant when one party (the “innocent party”) to an agreement becomes aware that the other party has breached a term of the agreement. In these circumstances, the innocent party has the option of enforcing its rights in respect of breach (e.g. exercising a right to terminate), “reserving” its rights or allowing the agreement to continue as if the breach had never occurred.
If an innocent party opts not to enforce or reserve its rights, the innocent party will generally not be entitled to exercise them at a later date (i.e. the innocent party has “waived” its rights). Importantly, an innocent party may be taken to have “waived” its rights if it does not provide a timely response to a breach of an agreement by the other party.
No Waiver Clauses
A standard No Waiver clause will look something like this:
No delay, neglect or forbearance by either party in enforcing against the other any provision of this agreement shall be a waiver by, or in any way prejudice any right, of that party under this agreement.
The general purpose of this clause is to protect an innocent party that has failed or has delayed enforcing its rights in the event of a breach of the agreement by the other party.
For example, consider the circumstances where a club has entered into an agreement with a drinks supplier. Let’s assume the agreement requires the supplier to supply drinks within seven days of the club placing a supply order, but the club has accepted a late supply of drinks on a number of occasions. A No Waiver clause will help prevent the supplier from claiming that the club has waived its right to the seven-day supply by not enforcing its rights on previous occasions and, therefore, cannot require the supplier to comply with this requirement in the future.
Limitations of No Waiver Clauses
In a recent UK case, the court found that a party had “waived” its right to terminate the agreement by failing to enforce its termination right until approximately a year after the breach occurred. This was despite the fact the agreement contained a No Waiver clause. While Australian courts are not required to follow the UK case, Australian courts could arrive at a similar result to this case.
An innocent’s party failure or delay in enforcing its rights will likely mean that the innocent party will be prevented from doing so in the future, irrespective of whether the agreement contains a No Waiver clause.
The main takeaway is that a club should immediately act to enforce or reserve its rights as soon as the club becomes aware of a breach of an agreement by the other party.
Is It Still Worth Including a No Waiver Clause?
Despite the potential limitations of No Waiver clauses, these clauses make it more difficult for a party to an agreement to claim the innocent party has waived its rights in respect of a breach. Clubs should ensure their commercial agreements contain appropriate No Waiver clauses by obtaining legal advice before entering into, amending or renewing an agreement.
If a club becomes aware of a breach of an existing agreement by the other party, it is crucial the club immediately acts to protect its rights in respect of that breach. A failure to take the necessary steps in these circumstances may amount to a “waiver” of the club’s rights.
For more information contact Bruce Gotterson on email@example.com
This article is intended to provide general information in summary form on a legal topic, current at the time of publication. The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.