Wavering On Waivers

The law of variation, waiver and estoppel, it has been said, is a difficult subject. Perhaps the following passage explains it best:

"The law is still in a state of development and neither the boundaries nor the requirements of the two doctrines (waiver and estoppel) are as yet clearly marked out. The area is further confused by the inconsistent use of terminology. Different judges and writers use different words to mean the same thing and the same words to mean different things. 'Waiver', 'total waiver', 'waiver of remedy', 'waiver of rights', 'election', 'abandonment', 'equitable estoppel', ' quasi estoppel' and 'waiver estoppel' are among the expressions which have been used. It is clear that several of these expressions mean the same thing."1

This article examines the doctrine of waiver and its application in this jurisdiction.

Waiver at common law

The word "waiver" should apply strictly to forgiving non-performance, either before or after the time for performance has arisen. However, the word has also been used with reference not only to a waiver of performance, but also to a waiver of a breach of contract; that is to say, a waiver of the rights of an innocent party arising out of the breach by the other party.

It appears from the literature that there are at least four types of waiver to consider:

(a) A waiver of breach which may be in the form of:

(i) a waiver by election; or

(ii) a total waiver.

(b) A waiver of performance which can take the form of:

(i) a forbearance waiver;

(ii) a unilateral waiver.

The distinction between the two categories is premised on whether there is an accrual of a right.

In situations involving a breach of contract, the application of either category of waiver would depend on the seriousness of the breach. Where there has been a serious breach which goes to the root of the contract, a right accrues to the innocent party to terminate the contract and it is in that situation that a waiver of breach could operate.

If, however, the breach does not entitle the innocent party to terminate the contract, his remedy lies only in damages and it is in such a situation that a waiver of performance could arise.

Further, there can be a waiver of performance without a breach of contract.

Common elements

There are several common elements in all four types of waivers. Firstly, a waiver in principle does not require consideration.2 This is what differentiates a waiver from a variation, where the presence of consideration is vital:

"A waiver is distinguishable from a variation of a contract in that there is no consideration for the forbearance moving from the party to whom it is given... Although consideration need not be proved, certain other requirements must be satisfied for such an estoppel to be effective."3

(Emphasis added)

Even where performance is varied, it only amounts to a waiver if there is no consideration:

"Where an agreement to vary a contract is not itself contractually enforceable for want of consideration it will only take effect, if at all, as a waiver or on the basis of the doctrine of promissory estoppel."4

Secondly, in order for a waiver to be effective, the waivor needs to make a clear and unequivocal representation to that effect, either by words or by conduct:5

"A party can represent that he will not enforce a specific legal right by words or conduct. He can say so expressly — this of course he can only do if he is aware of the right. Alternatively he can adopt a course of conduct which is inconsistent with the exercise of that right. Such a course of conduct will only constitute a representation that he will not exercise the right if the circumstances are such to suggest either that he was aware of the right when he embarked on the course of conduct inconsistent with it or that he was content to abandon any rights that he might enjoy which were inconsistent with that course of conduct."6

For conduct to amount to an unequivocal representation, it must be unequivocal in the true sense of the word — it must be capable of one construction only, namely, that the waivor has chosen to forgo his rights.7 Although silence alone cannot constitute a waiver, it may give rise to an unequivocal representation of a waiver when viewed in its context.8

Finally, it is necessary for the waivor to be aware of the facts that gave rise to the rights being forgone, the right to forgo those rights and the connection between the two.9

Waiver by election

This form of a waiver of breach arises:

"... when a state of affairs comes into existence in which one party becomes entitled, either under the terms of...