Modification And Waiver Outline

Modification & Waiver

1. Connected to PER?

   1. In both, a part is seeking to subvert the terms in a written agreement.

   2. Instead of alleging parol agreement prior/contemporaneous with execution of writing, they allege and agreement to modify the contract or a waiver of a contract term.

   3. Modification: 1) an apparent agreement to adjust terms. 2) if a contract as modified is within the statute of frauds, then a writing to satisfy statute. 3) under the common law, a legal basis for enforcing the modification (consideration or reliance).

   4. Waiver:

      1. an intentional relinquishment of a known right (Clark, Easterbrook dissenting)

      2. requires no consideration for a waiver, nor any prejudice or injury to the other party. Clark.

      3. A waiver can never be revoked. Clark

      4. A waiver affecting an executory portion of the contract may be retracted unless the retraction would be unjust in view of a material change of position in reliance of the waiver (UCC 2-209(5)) and R2 § 84

   5. Clark v. West, pg 144: West promises Clark $2 per page as base rate, plus additional $4 per page if he totally abstains from drinking during terms of contract. Clark drank, but claims he is entitled to $4 per page because West agreed to waive this condition.

   6. Wisconsin Knife Works v. national metal Crafters (bspace): contract for delivery of 281,000 spade bi blanks in Oc and Nov 1981. NMC delievered only 144,000 as of Jan 1982. WKW cancels contract and sues for damages for missed deliveries. NMC denies liability, alleging WKW agreed to push back the dlivery dates to dates in the future. WKW takes the position that it allowed NMC to perform, and did not complain about the delays, in order to secure needed performance with the least difficulty, which mitigated damages. NMC takes the position that the delivery dates were never firm and that these dates were definitively settled by agreement during the course of performance

   7. What rights are subject to waiver?

      1. Clark: the requirement that Clark drank was a means to an end (quality work) and not the end in itself. So the absitenance was not proper consideration for the $4. (Werner does not question the premise that the consideration for a promise cannot be waived)

      2. R2 § 84(1) – a promise to perform a onditional duty in spite of the non occurrence of the condition is binding unless occurrence of the condition was a material part of the agreed exchange for the performance of the duty.

         1. Materiality is better word than consideration because it goes to the importance of the term.

         2. Consideration is a litmus test for one type of enforceable promise (bargains), but typically one doesn’t parse a bargain to ask what precisely constitutes the consideration. Nor does one question the sufficience of consideration if there is an apparent bargain.

   8. What interests are protected by waiver?

      1. Werner: refers to the forfeiture that would result from enforcing the condition.

         1. Forfeiture – non payment for work done

            1. A loss of the promised counter-performance when a party has performed his part of the bargain

            2. Many forfeiture cases involve insurance

            3. The non-fulfillment of condition (or the breach) must not have materially harmed the other party or that the harm be rectified with damages

            4. The party claiming forfeiture must have substantially performed his part of the bargain

               1. Illustration 3 and 4, pg 148

            5. Although waiver does not require reliance, saiver can be RETRACTED for an executor portion of a contract in the absence of reliance.

               1. Illustration 6, pg 148

   9. What constitutes an expression of waiver?

      1. Clark: in the insurance context, words and acts of the insurer reasonably justify the conclusion that with full knowledge of the facts it intended to abandon or not insist upon a defense.

         1. Clark alleges waiver by failure to object, affirmative representations, and mutual agreement

         2. Werner says Clark must establish an express waiver, precluding waiver by failure to object

         3. Sometimes silence may constitute waiver, but not in this case.

   10. f, h, I questions are interconnected

       1. Less may be required in the clarity of expression of a waiver if the waiver is retractable

       2. More is required in clarity of expression if the term allegedly waives is important to the party against who waiver is being asserted.

       3. Less is required in the clarity of expression if enforcing the term would clearly result in a windfall and unjust enrichment.

       4. Shiled, not sword

          1. Posner in Wisconsin Knife: a feature shared by waiver and equitable estoppel: a waiver merely removes an old term (unlike a modification that substitutes a new term for an old).

          2. Why is waiver better suited to removing terms than adding?

             1. The feature follows from the term itself. The word waiver is not easily used to describe an undertaking of an obligation to another.

       5. Doctrine of waiver only operates to adjust obligations between people, between who obligations are already owed.

          1. A incorrectly tells B there is no need to file a written insurance claim, and A is an agent of the insurance company, then this would be a straightforward case of waiver. On the other hand, if A has no relationship to the insurance company, then the doctrine of waiver would not be a basis for imposing liability on A. One would need to look to tort or contract law to find a basis for imposing liability

2. No oral modification

   1. Generally unenforceable under common law (Wisconsin Knife)

      1. Enforceable under UCC if assent to clause is properly secured, See § 2-209(2)

      2. Must be on a form separately signed by other party (or form taker will b asked to initial clause, signifying it has been called to his attention)

         1. Except as between merchants

      3. Merchant = any commercially sophisticated party, UCC § 2-104(1), Comment 2

3. UCC § 2-209(4): a modification that is ineffective because of a failure to comply with a NOM clause or to satisfy the statute of frauds can operate as a waiver

4. Wisconsin Knife: Easterbrook vs. Posner – whether waiver requires reliance

   1. Easterbrook: there almost always will...

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