“No Waiver” Clauses in San Diego Business Contracts

Many sophisticated business contracts in San Diego and California contain what are called “no waiver” clauses. The intent of these clauses is to prevent an accidental or inadvertent waiver of contractual rights in the event of breach of contract. Usually, “no waiver” provisions specify that contractual rights and remedies can only be waived upon written notice.

If you want to insert no waiver clauses in your business contracts or if you want such provisions reviewed by a good San Diego corporate lawyer, contact San Diego Corporate Law. Here is some information of no waiver clauses in California.

San Diego Corporate Law: What is a No Waiver Clause?

As noted, the purpose of a no waiver clause is to prevent an accidental or inadvertent waiver of contractual rights. Take a commercial supply agreement, for example: Suppose you supply widgets to various customers under contract and under the provisions of the contracts, your customers must pay within 30 days. You have one customer who, last month, was late in making payment. You did not sue or otherwise declare the customer to be in default.

Without a no waiver clause in the lease, your customer might be able to argue that you waived the right to declare a default for late payment. This is particularly true if there starts to be a pattern of late payment. A typical example of a no waiver clause would be something like this:

“No Waiver. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder or pursuant hereto shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or pursuant thereto.”

San Diego Corporate Law: A No Waiver Clause Prevents a Course of Dealing Modification

Under California law, a contract can be formed or modified by the conduct of a party or by the course of dealings between two parties. These types of contracts go by the name “implied contracts.” The legal doctrine flows from the idea that contract formation or modification requires “a manifestation of assent” and assent may be manifested by written or spoken words or by conduct. Types of conduct include:

• Non-verbal body language
• Course of dealing
• Usage of trade
• Course of performance
• And more

See Binder v. Aetna Life Ins. Co., 89 Cal. Rptr. 2d 540 (Cal. App. 2nd Dist. 2000). This is codified at Cal. Civil Code, § 1619 which states: “An implied contract is one, the existence and terms of which are manifested by conduct.”

In our supply contract example above, after several incidents of you — the supplier — accepting late payments from the customer, the customer can argue that a new modified supply contract has been agreed to whereby you have agreed to accept late payments.

However, a no waiver provision prevents any legal claim of a modification-by-conduct.

Contact San Diego Corporate Law Today

For further information, please contact Michael Leonard, Esq. of San Diego Corporate Law. Mr. Leonard can assist and can update as needed your business contracts and review any contracts that your business is being asked to sign. Contact Mr. Leonard via email or by calling (858) 483-9200. Mr. Leonard has been named a “Rising Star” three years running by SuperLawyers.com and “Best of the Bar” by the San Diego Business Journal.

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