Variation of a Contract & Waiver of Rights

Gates v. Croft, 2009 NSSC 184 (CanLII)

[51] What I did not notice until late was that the plaintiff’s first brief, at ¶ 30, raises the issue of waiver, as discussed by G.H.L. Fridman, The Law of Contract (Fourth Edition) (Carswell; 1999), page 548. I made a comment this morning in response to Mr. Fraser’s motion for non suit that reflected the fact that the law of waiver is not the same as in respect of variation of a written contract; the latter has to be in writing; the former does not. I am going to take a few minutes to read more of the quote from Fridman. I think Mr. Peacock’s Fridman quote was from the Fourth Edition. I have the Fifth Edition of 2006, but it does not say it much differently. It talks about what waiver is as opposed to what varying a contract is, and it begins at p. 561 under the heading, “Change of duty”:

Two important methods of changing the original duty to perform created by a contract are by variation of the contract and waiver of rights arising thereunder. The two methods must be carefully distinguished. In cases of variation what happens is that, by mutual agreement, for the benefit or convenience of both parties, there is a later alteration of the original agreement. Hence, a unilateral variation, even if permitted by the original contract, must be accepted by the other party with full knowledge and consent and must be made for valid consideration, if it is to be valid. Where waiver is alleged to have occurred, however, the change is for the benefit or convenience of one party only, and the other party is said to acquiesce in such change in the original terms of the contract. In both situations there is a later agreement between the parties affecting their earlier transaction. Where variation is the allegation, such agreement, whether written or oral, is express. Where waiver is alleged, the suggested alteration is, at the most, implicit from what has occurred. Furthermore, where the original agreement has been varied by a later one, then, to the extent such variation is operative, the first agreement must now be considered to have been completely change in respect of the variation in question. If wavier is alleged, however, the original rights and duties of the parties remain unchanged, save that, by virtue of the waiver, insofar as it is operative and effective, the party acquiescing in the change cannot enforce its original rights . . . Thus, it is important to differentiate variation of a contract from waiver of rights under a contract.

A contract which varies an earlier agreement will be valid to the extent to which it is itself an enforceable agreement. Thus, there must be consideration . . . If the contract is one covered by the Statute of Frauds, . . . or any other statute which requires the contract to be in writing or similarly evidenced in writing, the subsequent variation must itself be so effected, . . . Thus, while a later agreement which rescinds or replaces an earlier one will be effective to achieve such purpose even if it is neither written nor evidenced in writing, such an agreement will be ineffective . . . if it merely purports to vary. The question in each instance is what was the intention of the parties when they made their second agreement. If variation was their ultimate intent, they must follow the same rules as the form as applied to the same contract.

In other words, it must be in writing and signed.

The situation is different, however, where what is alleged is not a variation but a waiver. Waiver occurs where one party to a contract or to proceedings takes steps which amount to foregoing reliance on some known right or defect in the performance of the other party.

Waiver occurs where one party to a contract or to proceedings takes steps which amount to foregoing reliance on some known right or defect in the performance of the other party. At common law, a waiver of rights created by or under a contract, not being itself an agreement, did not have to be supported by consideration; nor would it have to be in writing or evidenced by a note or memorandum in writing, if the original contract were within, for example, the Statute of Frauds . . . The intention of the party relinquishing the right to rely on the deficiency may be expressed in a formal legal document or in some informal fashion or inferred from conduct.

[52] Fridman goes on at page 563 to give examples. He suggests that waiver of a true condition precedent is not possible. From another case he writes at page 564:

Waiver . . . was a voluntary and intention relinquishment of a known existing legal right . . . To establish waiver, it had to be shown that the person waiving his rights had full knowledge of their existence and their nature.

[53] At page 565 he writes:

. . . it is not surprising that it was important to differentiate variation and waiver, nor that confusion can arise between them. In both, it would seem, the parties are being held to their late alteration of the original, or former statement of their respective rights or duties. The only difference was with respect to the possible need for: (a) consideration; and (b) writing. . . .

[54] In effect, waiver is estoppel. It is stopping or preventing someone from taking back a representation about what they have agreed to.

[55] Professor Fridman suggests that a waiver may occur in respect of a past or present state of affairs but suggests it involves different considerations when the waiver is for a future event.

[56] The bottom line is this: Did the defendant waive payment of the deposit? Based on what I have read, and based on the evidence in this case, there was a right in favour of the defendant to the deposit, and he would have had to waive that right knowingly for the plaintiff not to be in breach of the agreement. There has been a defect in the plaintiff’s performance of the duty to pay a deposit for which, to be successful, he must prove an express and intentional waiver.

[57] The evidence before me does not show that Mr. Croft knew of the requirement that the deposit be paid within 48 hours. Even if he knew of the requirement for a deposit to be paid within 48 hours, it had not been made before he terminated the agreement. How could he waive something he had no knowledge of, and that was not put to him? He could not do it. Waiver has to be intentionally given. The most frequent example of a waiver is where a contract says you will do something this way, and for a year, two, three, or four, it is done another way, and then the defendant says: Oh, it was not done the right way, I do not have to pay for anything that was done for the past four years. That is the type of circumstance in which waiver most often arises.

[58] On the facts of this case, there is no evidence that Mr. Croft knew of the defect in the performance of the obligation to pay a deposit before he terminated the contract. He cannot waive what he does not know. That is the simple bottom line. I can go on; counsel argued other points, but that is the bottom line.

[59] One final point that I should make. If the plaintiff failed to pay the deposit before the termination of the contract by Mr. Croft, then there was no consideration for the agreement and that is a fundamental breach. There was no deposit paid before the defendant terminated the contract. I referred earlier to a case out of the Supreme Court of Canada; their last decision on fundamental breach called Hunter Engineering v. Syncrude. Two judgments were written. Justice Wilson wrote that fundamental breach is still the law; it is a blunt instrument but it is still the law. Justice Dickson wrote that the law had evolved and the issue now is not one of fundamental breach but rather of unconscionability.

[60] While most Courts of Appeal have since attempted to meld the two different judgments into a single analysis, suggesting that they really are not that different, either approach, quite candidly, lead, on the facts of this case, to the same result. The bottom line is that whether one calls it fundamental breach, per Justice Wilson, or one applies the analysis of Justice Dickson ( if their analyses differ), one comes to the same result: The failure to pay the deposit before the termination of the agreement was a fundamental breach of the contract; it would be unconscionable to permit the plaintiff to enforce an agreement when he had failed to pay the deposit agreed to pay.