I thought we could start the New Year with an interesting case I received just before the Christmas break.
The matter related to the failure of my client’s suppliers to provide certain goods and materials by an agreed date in early October. Luckily, the deliveries had not been required straight way and so there was no immediate pressure. However, my client admitted that he had not been able to decide what to do in October and he had been so busy with the usual pre-Christmas rush that he had procrastinated first of all and then made a single phone call to the delinquent supplier in question. Critically, during that telephone conversation in November my client had indicated to the supplier that he (my client) wanted to keep their business relationship going and that he was looking forward to receiving the delayed supplies soon.
When I talked to the client at our meeting in mid-December the missing suppliers had still not arrived and this was beginning to cause some delays in production. The client just wanted to know if he could still terminate the contract and get an alternative supplier to deliver. Importantly, he asked if the failure to terminate straight away (as well as his telephone conversation) meant that he had “waived” his rights of termination. The client actually thought he was “OK” because the supply agreement had a “no-waiver clause”. He had been told, he said, that no-waiver clauses would be water-tight protection against delays in terminating. I am not sure he is right in all cases. It does indeed depend on the circumstances.
One of the best cases on this point is Tele2 International Card Company and others -v- Post Office Ltd [2009] EWCA Civ 9 in which the English Court of Appeal held that where there has been a breach of contract, a non-breaching party failing to act can be held to have affirmed the contract, thus losing the right to terminate, despite the presence of a no-waiver clause in the document. Tele2 International Card Company and others -v- Post Office Ltd [2009] EWCA Civ 9 confirmed the view that such clauses are not failsafe in all circumstances and acts as a reminder that a party faced with a material breach should take prompt and decisive action should termination be their preferred option.
In the Tele2 case the following clause has been included in the contract :
“In no event shall any delay, neglect or forbearance on the part of any party in enforcing (in whole or part) any provision of this Agreement be or be deemed a waiver thereof or a waiver of any other provision or shall in any way prejudice any right of that party under this Agreement.”
In the High Court the judge had held that the defendant had indeed affirmed the contract but the clause had preserved their right to terminate and the notice of termination was therefore validly given. However, the Court of Appeal strongly disagreed. Aikens LJ said there was no doubt that the claimants had been in breach, as a result of which the defendant had a choice around the date of breach: affirm or terminate. Wherever there is a dispute about a party’s course of action in these circumstances, the court’s task is to make a finding one way or the other, namely, whether that party elected to affirm or terminate, and this is a question of fact. The no-waiver clause was therefore “of no particular help” except perhaps to emphasise that an election to affirm must be “clear and unequivocal”. The general law requires a party with a contractual right to terminate to elect whether or not to do so. The clause did not attempt to exclude this doctrine, even assuming that this were possible. The defendant’s conduct, in carrying on with the agreement for nearly a year without protest, could only be seen as abandoning its right to terminate. In fact it was a “clear and unequivocal communication, by conduct” of a decision to affirm. The defendant was not therefore, it was held in the Court of Appeal, entitled to serve the termination notice.
The message to be learned is that regardless of whether or not you have a no-waiver clause, if you do or say anything that could be interpreted as a clear and unequivocal confirmation of a contract, or if you continue as if the contract is still in force, then any right of termination will be lost for that respective breach event.
Short Oxford English Dictionary:
to waver = to show doubt or indecision; falter in resolution ; vacillate.
to waiver = refrain from insisting on or making use of (a right, claim, opportunity, etc.), relinquish, give up or surrender a right.