The term ‘Waiver’ in general usage means to renounce any right or claim. It is a conscious informed decision that a party takes with respect to the renunciation of any right or claim that some other party is obliged to perform. Black’s Law Dictionarydefined Waiver to mean the voluntary relinquishment or abandonment - express or implied - of a legal right or advantage;…The party alleged to have waived a right must have had both knowledge of the existing right and the intention of forgoing it. Accordingly, essential elements of a Waiver shall include:

  •  A voluntary act;
  •  Relinquishment or abandonment of a right;
  •  Either express or implied;
  •  Knowledge of existing right;
  •  Intention to forgo such right.
 

WAIVER UNDER INDIAN LAWS

Under the Indian Contract Act, 1872 (“ICA”), Waiver finds its genesis under section 63, whereby, a party (promise) is statutorily allowed to waive contractual performance by the other party (promisor). Section 63 of ICA reads as follows:

63. The promise may dispense with or remit performance of promisee.—Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.

Section 63 envisages three approaches of waiver available to a party (promisee):

  1. Dispense with or remit the performance – The promisor shall not be required to perform the contractual promise;
  2. To extend the time of performance – The promisor shall be required to perform the contractual promise within some extended time period as may be allowed by a promisee;
  3. To accept any other satisfaction instead of performance – The promisor shall be required to perform some other promise instead of a contractual promise to the satisfaction of promisee.

The waiver can only be granted to any claim arising out of a promise. Such promise may arise out of a contract executed between a party, or otherwise, in pursuance of any other legally binding agreement. 

A party (promisee) voluntarily and unilaterally grants a concession to the other party (promisor) by not requiring any performance by such other party or allowing performance in some other manner not envisaged in a contract. However, a Waiver neither involves, nor result in, any amendment to the existing contract, nor does the other party (promisor) is necessarily required to pay any specific consideration solely in pursuance to Waiver.

WAIVER UNDER JUDICIAL PRONOUNCEMENTS

The concept of Waiver has been elaborated by the Indian judiciary in the multitude of cases. In M/S Motilal Padampat Sugar Mills ... vs State Of Uttar Pradesh And Ors on 12 December 19782, the Hon’ble Supreme Court has held as follows:

“..Waiver means the abandonment of a right and it may be either express or implied from conduct, but its basic requirement is that it must be "an intentional act with knowledge". Per Lord Chelmsford, L.C. in Earl of Darnley v. London, Chatham and Dover Rly. Co. There can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it. It is pointed out in Halsbury's Laws of England (4 d) Volume 16 in paragraph 1472 on page 994 that for a "waiver to be effectual it is essential that the person granting it should be fully informed as to his rights"..”

The Hon’ble Supreme Court in P. Dasa Muni Reddy vs P. Appa Rao on 10 September, 1974has held Waiver to mean as follows:

“….Waiver is an intentional relinquishment of a known right or advantage, benefit, claim or privilege which except for such waiver the party would
have enjoyed. The waiver can also be a voluntary surrender of a right…….The doctrine which the courts of law will recognise is a rule of judicial policy that a person will not be allowed to take inconsistent positions to gain advantage through the aid of courts. Waiver sometimes partakes of the nature of an election. The waiver is consensual in nature. It implies a meeting of the minds. It is a matter of mutual intention. The doctrine does not depend on misrepresentation. Waiver actually requires two parties, one party waiving and another receiving the benefit of waiver. There can be waiver so intended by one party and so understood by the other. The essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The voluntary choice is the essence of waiver. There should exist an opportunity for choice between the relinquishment and an enforcement of the right in question. It cannot be held that there has been a waiver of valuable rights where the circumstances show that what was done was involuntary. There can be no waiver of a non-existent right. Similarly, one cannot

waive that which is not one’s as a right at the time of the waiver. Some mistake or misapprehension as to some facts which constitute the underlying assumption without
which parties would not have made the contract may be sufficient to justify the court in saying that there was no consent.”

Accordingly, any Waiver shall necessarily include the following essential elements:

  1. An abandonment or relinquishment of any right;
  2. A party abandoning or relinquishing is fully informed and possess full knowledge of its right intended to be waived;
  3. A party waiving any right acknowledges his entitlement to get the right enforced, which is proposed to be now waived;
  4. Such right must be existing at the time of waiver;
  5. Abandonment or relinquishment is intentional;
  6. Abandonment or relinquishment is voluntary;
  7. The benefits of Waiver is enjoyed by the other party.

Section 63, vis-à-vis, section 62

Section 62 of ICA envisages provisions with respect to novation, recission or alteration of a contract upon mutual agreement between the parties, as a result of which, the original contract need not be performed. A major differentiating factor between sections 62 and 63 of ICA is that while the former affects the rights of both parties to a contract while the latter affects the right of one party. In Union Of India (Uoi) vs Kishorilal Gupta & Bros. on 11 February 19534, section 62 necessarily implies consideration while under section 63, a party (promisee) may gratuitously release the other party (promisor) from consideration.

 

OTHER ASPECTS

The doctrine of Promissory Estoppel

The application of waiver is essentially based of the Doctrine of Promissory Estoppel, whereby, in the case where one party (promisee) represents, either through his conduct or otherwise, to the other party (promisor) that he will not insist on the enforcement of his right under a contract, and whereby, such other party (promisor) acts upon such representation, the first party (promisee) shall not be allowed to withdraw from such representation. However, in certain cases and under certain circumstances, the first party (promisee) may be allowed to withdraw provided that either it's not too late, or may not cause injustice to the other party (promisor). Accordingly, the first party (promisee) shall be bound by the Waiver he has made.

The Doctrine of Promissory Estoppel has been discussed at length by Hon’ble Supreme Court in the matter of M/S Motilal Padampat Sugar Mills ... vs State Of Uttar Pradesh And Ors on 12 December,

19785. The Hon’ble Supreme Court, inter alis, has held any withdrawal by the promisee to be inequitable in nature. The Doctrine is neither in the realm of contract nor in the realm of estoppel. The basis of the doctrine is the interposition of equity, which has always true to its form stepped in to mitigate the rigours of strict law.    

Waiver Clause

A contract may explicitly provide for a Waiver Clause. Though any Waiver is, at all times, governed by the provisions of section 63 of ICA and other judicial pronouncements, the wording of a Waiver Clause may provide additional conditions or requirements with respect to Waiver. For instance, a Waiver Clause may provide for any Waiver to be compulsorily in writing to be effective. Further, a Waiver Clause may provide clarification with respect to the fact that any failure on part of a promisee to insist upon performance of a promise shall not automatically render such performance by promisor as having been waived.

 

CONCLUSION

The waiver is, thus, a voluntary act, either express or implied, by a promisee to not to insist on the strict performance of a promise by a promisor. It compulsorily releases a promisor from his obligation to perform. A Waiver doesn’t result in an alteration to an existing contract but the rights are forgone by a promisee unilaterally. However, it is of utmost importance that the promisee making a Waiver has knowledge of his rights, and intentionally makes a Waiver. Further, once a Waiver is made, the promisee cannot resile from the same, and accordingly, cannot require enforcement of his right from promisor.

 

Even if a contract doesn’t expressly envisage provisions with respect to Waiver, any subsequent acts by a promisee, either express or implies, may conclude into a Waiver.  However, where there is one, the parties to the contract shall be bound by the conditions envisaged under the same.


[1] Black’s Law Dictionary (9th edition)                    

[2]  1979 AIR 621, 1979 SCR (2) 641

[3] 1974 AIR 2089, 1975 SCR (2) 32

[4] AIR 1953 Cal 642

[5]  1979 AIR 621, 1979 SCR (2) 641                                                              

 

Authors: I Abhishek Bansal, Partner ([email protected]) I Pavish Singhla, Senior Associate ([email protected]) I ACUMEN JURIS I

Practice Areas: I Corporate & Commercial I Acquisitions & Investments I Arbitration & Dispute Resolution I

 

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