Waiver is a fundamental concept in contract law and you will also find waiver in procurement contracts. It refers to the voluntary relinquishment** or surrender of some known right or privilege. In the context of procurement, a waivers can have significant implications on how contractual obligations are enforced and interpreted.

Waiver in Common Law Systems

Definition and Application:

• In common law systems (e.g., the United States, United Kingdom, Canada, Australia), a waiver is the voluntary relinquishment or abandonment of a known right or privilege.
• A waiver can be express (clearly stated) or implied (inferred from conduct).
• Common law emphasizes the parties’ intentions and the actual conduct that indicates a waiver.

Requirements:

• Intent: There must be a clear intention to waive the right.
• Knowledge: The party waiving the right must have knowledge of the right being waived.
• Voluntary Act: The waiver must be a voluntary act without coercion.

Examples in Procurement Contracts:

• Express Waiver: A clause in a contract explicitly stating that late delivery penalties can be waived by the buyer in certain circumstances.
• Implied Waiver: Consistent acceptance of late deliveries without objection might imply that the buyer has waived the right to enforce the delivery deadlines.

Waiver in Civil Law Systems

Definition and Application:

• In civil law systems (e.g., Germany, France, Japan), the concept of waiver is less formalized than in common law systems, but similar principles exist.
• Civil law systems often integrate the idea of waiver within broader doctrines like good faith, estoppel, and contractual modifications.

Requirements:

• Good Faith: Actions implying waiver must generally be consistent with the principle of good faith, which is a cornerstone of civil law systems.
• Clarity and Consistency: Waiver must be clear and consistent, though the approach might be less rigid compared to common law systems.

Examples in Procurement Contracts:

• Good Faith Modifications: Adjusting contract terms without a formal written waiver, provided it is done in good faith and both parties have a mutual understanding.
• Reliance and Detriment: If one party relies on another’s conduct implying waiver, and it would be detrimental to enforce the original terms, the waiver might be recognized.

Comparative Aspects and Practical Implications

Formality:

• Common Law: Emphasizes formalities and clear evidence of intent and knowledge. Written waivers are common to avoid disputes.
• Civil Law: More flexible, often integrating waiver into broader concepts of good faith and fairness.

Enforcement:

• Common Law: Waivers are strictly construed, and clear evidence is required to prove a waiver has occurred.
• Civil Law: Courts may consider the overall conduct and relationship between parties, and whether enforcing a right would be against good faith principles.

Documentation:

• Common Law: Detailed documentation is crucial to ensure that waivers are enforceable and understood by both parties.
• Civil Law: While documentation is also important, there is more emphasis on the equitable treatment* and intentions behind actions.

How Waiver is Used in Procurement Contracts

1. Non-Enforcement of Specific Provisions:
   • Example: A buyer may choose not to enforce a specific delivery deadline set out in the contract if the supplier encounters unforeseen delays but has communicated effectively and provided reasonable assurances about the delivery timeline.
   • Implication: By waiving the right to enforce the delivery deadline, the buyer forfeits the ability to claim breach of contract for that specific delay. However, this does not necessarily affect other terms of the contract.
2. Acceptance of Non-Conforming Goods:
   • Example: A buyer might accept goods that do not meet the precise specifications outlined in the contract if the deviations are minor and do not significantly impact the intended use of the goods.
   • Implication: Accepting non-conforming goods can be seen as a waiver of the right to reject them based on those specific non-conformities.
3. Forgoing Penalties:
   • Example: A contract might stipulate penalties for late delivery. If the buyer decides to forgo these penalties due to exceptional circumstances communicated by the supplier, this constitutes a waiver.
   • Implication: The buyer waives the right to impose penalties for that particular instance of late delivery, but this does not preclude the buyer from imposing penalties for future delays.

When Waiver is Used in Procurement Contracts

1. During Contract Performance:

• Waivers can occur during the performance of the contract when one party chooses not to enforce certain terms. This can help maintain a positive relationship and ensure continued cooperation.

2. At the Time of Contract Execution:

• Sometimes, waivers are included in the initial contract to address specific potential issues or to provide flexibility. For example, a clause might state that the buyer can waive certain requirements if deemed appropriate.

3. Post-Contract Disputes:

• Waivers can be used as a resolution tool in post-contract disputes. For instance, during a dispute resolution process, one party might waive its right to claim certain damages in exchange for a quicker settlement.

Drafting and Managing Waivers in Procurement Contracts

1. Clarity in Language:
   • Clearly define the scope and limitations of any waivers in the contract. Ambiguities can lead to disputes about whether a waiver was intended or what its effects are.
2. Conditional Waivers:
   • Specify conditions under which a waiver is granted. For example, a waiver of penalties for late delivery might be conditioned on the supplier providing adequate notice and a revised delivery schedule.
3. Documentation:
   • Document all waivers in writing to avoid misunderstandings. Even if a waiver is implied through conduct, confirming it in writing can prevent future disputes.
4. Review and Approval Processes:
   • Implement internal processes for reviewing and approving waivers. Ensure that all relevant stakeholders understand the implications before agreeing to a waiver.

Example Waiver Clauses in Procurement Contracts

1. Waiver of Delay Penalties

Clause:
“The Buyer may, at its sole discretion, waive any delay penalties provided under this Agreement. Such waiver shall not constitute a waiver of any subsequent delays or other breaches of this Agreement. The Supplier must provide a written request for waiver detailing the reasons for the delay and any corrective actions taken.”

2. Waiver of Inspection Requirements

Clause:
“The Buyer may waive the requirement for inspection of goods upon delivery. This waiver does not waive the Buyer’s right to later inspect the goods and claim for any latent defects discovered after delivery. The waiver of inspection shall be documented in writing and agreed upon by both parties.”

3. Waiver of Specific Performance

Clause:
“In the event that the Supplier is unable to perform a specific obligation due to unforeseen circumstances, the Buyer may waive the requirement for specific performance of that obligation. Such a waiver shall be in writing and shall not affect any other obligations under this Agreement or the right to enforce those obligations.”

4. Waiver of Rights to Immediate Remedy

Clause:
“The Buyer may choose to waive the right to seek an immediate remedy for a breach of this Agreement. This waiver does not prevent the Buyer from seeking remedy at a later date for the same breach or any other breaches. All waivers must be in writing and signed by an authorized representative of the Buyer.”

5. Waiver of Confidentiality Breach Penalties

Clause:
“The Buyer may waive penalties for an inadvertent breach of the confidentiality provisions of this Agreement, provided that the Supplier takes immediate steps to remedy the breach and prevent future occurrences. Such a waiver shall not constitute a waiver of penalties for any subsequent breaches of confidentiality.”

Explanation of Clauses

1. Waiver of Delay Penalties:

• Usage: When the Buyer decides to forgive penalties due to delays in delivery or performance.
• Benefits: Provides flexibility to accommodate unforeseen circumstances without sacrificing future enforcement rights.

2. Waiver of Inspection Requirements:

• Usage: When the Buyer opts not to inspect goods upon delivery but retains the right to inspect and claim for defects later.
• Benefits: Offers convenience in certain situations while maintaining the right to address defects discovered later.

3. Waiver of Specific Performance:

• Usage: When the Supplier cannot fulfill a specific contractual obligation due to unforeseen events, and the Buyer chooses to waive this requirement.
• Benefits: Provides flexibility and acknowledges the realities of changing circumstances while preserving other contractual rights.

4. Waiver of Rights to Immediate Remedy:

• Usage: When the Buyer decides not to pursue an immediate remedy for a breach but reserves the right to do so later.
• Benefits: Allows for strategic decision-making regarding when to enforce rights without losing those rights.

5. Waiver of Confidentiality Breach Penalties:

• Usage: When the Buyer chooses to forgive penalties for an accidental confidentiality breach if the Supplier takes corrective actions.
• Benefits: Encourages quick resolution and improvement of practices while maintaining the ability to enforce penalties for future breaches.

Please note; above samples of waiver in procurement contracts are presented for educational purposes. Always adapt contract clauses to your specific conditions.

Conclusion

Waiver in procurement contracts, offer flexibility and fostering cooperative relationships between buyers and suppliers. However, they must be used judiciously and with a clear understanding of their legal implications.

Properly managing waivers — through clear contract language, documentation, and internal processes — ensures that they serve their intended purpose without unintended consequences. As a procurement specialist, recognizing when and how to use waivers effectively can contribute significantly to successful contract management and supplier relationships.

Waiver in procurement contracts provide essential flexibility and allow parties to accommodate unforeseen circumstances or minor breaches without sacrificing their overall contractual rights.

However, it is crucial to document any waivers in writing and ensure they are agreed upon by both parties to avoid misunderstandings and preserve the enforceability of the remaining contract terms.

The post about waiver in procurement contracts is part of Contract Clause Tag at LHTS’ blog

At Utbildning Inköp you will learn in Swedish about LHTS’ courses

Explanations:

* Equitable treatment refers to the principle of fairness and impartiality in the way individuals and entities are treated. It ensures that all parties are given equal consideration, rights, and opportunities, particularly in legal and business contexts.

** Relinquishment refers to the act of voluntarily giving up or abandoning a right, claim, or possession. In legal and business contexts, relinquishment is the intentional act of renouncing one’s rights or interests in something, often formalized through documentation or an explicit declaration.

Note: Illustration to the blogpost “Understanding Waiver in Procurement Contracts” was created by Chat-GPT at Aug 6, 2024.