A party to a conditional contract may waive a condition which is solely for that party’s benefit provided it is severable from the contract. However, the waiver cannot revive the contract if notice has already been given to terminate it.

Contracts for the sale of property are often made subject to a condition, such as the grant of planning permission or obtaining landlord’s consent for the assignment of a lease. Ideally the contract should specify whether either party may waive the condition and the effect of such a waiver on other contract provisions such as a right to terminate. In a recent case the High Court had to decide how those questions should be resolved where the contract was silent on the point.

The case concerned the sale of a flat. The lease plan had accidentally been transposed with that of an adjoining flat and the contract provided for the sale to be completed 14 days after the seller provided a deed of variation to correct the plan and an official copy of the register with an amended filed plan. In the meantime the buyer was allowed to move into the flat, but the contract provided that if, having used all reasonable endeavours, the seller was not able to provide those documents by a certain date, then either party could give five working days’ notice to terminate the contract.

The seller was unable to provide the documents in time and gave notice to terminate the contract but the buyer waived the requirement to provide the documents and insisted that the seller complete the sale. The seller claimed that the buyer had no right to waive the condition and applied for a declaration that the contract had been validly terminated.

It is established law that a party to a contract may waive a condition which is solely for that party’s benefit and which is severable from the remainder of the contract. In this case the judge said there was no doubt that the condition was for the exclusive benefit of the buyer. It was akin to a term stating what title the seller must give.

The seller argued that the condition was not severable from the remainder of the contract because the completion date was fixed by reference to the date on which the condition was satisfied so without the condition there was no completion date. The judge did not agree. If the condition was waived there would be no difficulty in arriving at a completion date. The contract would either be treated as if the condition had been performed, so that the completion date would be 14 days after the waiver, or as if the condition was deleted, in which case the court would specify the completion date, which in this case would probably be 14 days after the condition was waived.

The judge also rejected the argument that the mutual termination right was inconsistent with the condition being for the sole benefit of the buyer.

However, applying a recent Court of Appeal decision, the judge held that the waiver of the condition could not revive the contract once notice had been given to terminate it. The seller’s notice did not give a final five working days for the condition to be satisfied failing which the contract would end. The notice had the effect of terminating the parties’ contractual obligations immediately but gave five working days for the buyer to vacate the property and the seller to return the deposit.

So although the condition was validly waived, the contract was still terminated and the seller was not obliged to complete the sale.

The lesson is to ensure that the contract makes clear the circumstances in which a condition may be waived and the effect of the waiver on a termination right.

Source: Irwin v Wilson [2011] EWHC 326 (Ch); Akzo Nobel UK Ltd v Arista Tubes Ltd [2010] EWCA Civ 28.