You own a business and one of your best customers is late paying their invoice one month. To maintain your good relationship, you decide to forego charging the customer a late fee, although you have the right to do so written into your contract. Have you just established a precedent whereby that customer can expect you to always waive the late fee? The answer is no, if you have a non-waiver provision in your contract.
A non-waiver provision ensures that the parties to a contract hold onto their rights even if one of them excuses the other from a contractual obligation. So even if a contract has not been fully enforced in the past, it can remain enforceable with a non-waiver provision. Typically, non-waiver provisions state that contractual rights may only be waived by the written consent of the party granting the waiver.
Non-waiver provisions are used in many types of contracts, the most common of which include:
- Commercial lease agreements
- Insurance coverage agreements
- Mortgage agreements
- Property transfer agreements
- Lease and rental agreements
- Tenant contracts
- Employment agreements
Even with the presence of a non-waiver provision in a contract, some courts may hesitate to enforce it on the grounds that it limits the parties’ ability to adapt to changing circumstances. If the enforcing party has acted in bad faith or there has been a substantial delay in enforcement, a court may not enforce a non-waiver provision.
To protect your contractual rights, you should put your intention to waive (or reserve the right to waive) in writing and send it to the breaching party. If you decide to reserve your right to waive without enforcing that right immediately, you may want to ask the breaching party to sign an acknowledgment that your action does not constitute a waiver or your rights under the contract.
Williams Mestaz, L.L.P., is a law firm with decades of experience in commercial litigation, including employee lawsuits, IP infringement, business divorce, aviation, and high stakes litigation. Contact us at (602) 256-9400 and schedule a time to meet with us today.