My quest to draft a sane Waiver Clause
Here’s a smaller, simpler Waiver Clause which works just as well as the verbose ones.
Every contract has boilerplate clauses — clauses which are common to most contracts. There’s a reason why boilerplate clauses have attained their renowned status — their utility in a typical contract is well-proven.
However, their proven utility has not necessarily translated into good drafting. While boilerplate clauses are essential in the typical contract, the drafting of the typical boilerplate clause is often poor.
In this blog, I seek to draft a good sample of a very common boilerplate clause — the Waiver Clause.
What is a waiver?
In simple terms, a waiver is the permanent surrender of a right.
If you are a contracting party, the contract creates a number of contractual rights for you. These rights manifest themselves as an obligations on another contracting party . For instance, if a contract requires Sarkar to supply Gupta 5 samples of 'We Bare Bears’ before the end of the year — Gupta has a right to be supplied 5 samples of 'We Bare Bears’ by Sarkar before the year ends, and Sarkar thus has a duty to supply 5 samples of 'We Bare Bears' to Gupta before the year ends.
The holder of every contractual right has the power to waive the right — thereby releasing another contracting party from its respective obligation. This would constitute a waiver.
The need for Waiver Clauses in contracts
(i) The problem with waivers.
A waiver can be express or implied — express when communicated in words (a letter, email, a phone call, even a face to face conversation, etc.), implied when it has not been put in words but can be inferred from the conduct of the person waiving the right. It’s that simple, at least in Indian law.
Here’s the problem —
Express waivers are easy to identity, but implied waivers are not.
This can cause much dispute between the contracting parties, if one claims an implied waiver has taken place and the other disputes it.
Precisely what conduct constitutes an implied waiver is often difficult to ascertain. Does omitting to enforce a contractual right for the time being amount to a waiver — such as, if I accept your defective goods under a contract of supply without any demur, can you later claim that I thereby waived my right to obtain damages from you for the supply of defective goods?
Disputes regarding whether a particular conduct amounts to waiver may therefore arise frequently. This is more so because the law will view whether a reasonable person may interpret your conduct as a waiver, although you may never have intended so — there’s really no other way to know, because we can’t peep into your mind.
Disputes such as this (and the associated costs) can be avoided by a Waiver Clause in the contract.
(ii) How Waiver Clauses solve this problem.
The object of a Waiver Clause is simple —
Settle, between the contracting parties, precisely what may be a waiver of the rights arising out of that contract.
It’s really simple to draft a good Waiver Clause— it’s a two-step process:
- Identity what should constitute a waiver — according to the contracting parties.
- Draft a Waiver Clause— stating that nothing shall constitute a waiver of a contractual right/obligation except those events.
Done. Simple. This settles all confusion on waivers between the contracting parties. A waiver can no longer be implied from anything except what has been specified, as the parties have expressly agreed that waivers can be made only in a particular manner.
Drafting a model Waiver Clause
(i) Bad samples.
What does a typical Waiver Clause look like?
Here’s a somewhat good sample Waiver Clause I came across (but it’s still inordinately long):
No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
Damn. Another sample, and I’ll warn you this one’s worse:
The provisions, terms, covenants, representations, warranties and conditions of this Agreement may be waived only by a written instrument executed by the party hereto waiving compliance. The failure of any party hereto at any time or times to require performance of any provision of this Agreement shall in no manner affect the right of such party at a later date to enforce the same. No waiver by any party hereto of any condition or the breach of any provision, term, covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such condition or of the breach of any other provision, term, covenant, representation or warranty of this Agreement.
Whew.
Both of these are verbose — they use more words than are necessary and sufficient for the purpose. I’ll point out the verbosities in both these samples:
- “Provisions, terms, covenants, representations, and warranties”: Dude. Just use “provisions”, everything else is a subset of it.
- Failure to enforce rights not waiver: My God. If you can waive contractual rights only in writing (as stated), it follows you cannot waive it in any other way. You don’t need to say failure to enforce rights is not a waiver, it’s understood. Unnecessary words.
- Waiver, “by conduct or otherwise”: Wait, wait, wait. You just said waiver can be effected only in writing. So why does another part of the clause deal with waiver “by conduct or otherwise”? This is not just bad semantics, it’s internal contradiction.
- Waiver not to be, further or continuing waiver, not a waiver of another provision, etc.: Waiver has a very precise meaning in law. It’s a technical legal term. You don’t need to define it further, by qualifying it with various adjectives. It’s unnecessary.
(ii) My model Waiver Clause.
Let’s begin with my humble formula.
- How would I like waivers to happen? Only in writing. It’s the safest bet to avoid confusion between the contracting parties.
- That’s all I need to capture in my Waiver Clause.
Using my formula of using only necessary and sufficient words, I’ve come up with my model Waiver Clause accordingly. It has just the words I need to express what I want, neither more nor less.
For a 2-party contract, I’d draft this Waiver Clause:
A Party may waive an obligation to it arising out of this contract, wholly or partially, only by a written notice to the other Party.
For a multi-party contract, I’d draft the same Waiver Clause like this:
A Party may waive an obligation to it arising out of this contract, wholly or partially, only by a written notice to the other Party/Parties whose obligation is being waived.
There you go — these are as effective as those typical samples above (maybe even better), but use much lesser words. Simple and effective.
Epilogue
As I’ve previously noted, a Waiver Clause is one of the most common boilerplate clauses. Waiver Clauses thus suffer from the same problem most other boilerplate clauses suffer from — copy-paste drafting.
In our world of Ctrl+A, Ctrl + C, Ctrl + V, the typical drafter often copies in toto a Waiver Clause from a sample you can easily find on the internet or the law firm’s intranet.
Not much thought is given to drafting boilerplate clauses. Consequently, the quality of boilerplate clauses is typically poor — because, let’s face it, the general state of contract drafting across the world is quite poor.
In an earlier blog, I have argued extensively that contracts can — and should be — shorter:
It is time for us drafters to take a break from copy-paste drafting, and actively and critically draft boilerplate clauses— to actually put some thought into boilerplate clauses.
It’s time to do away with the practice of verbose drafting — it helps no one. Boilerplate clauses are an easy place to begin.
