Key points:

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  • In the absence of an express power of waiver, a contractual condition is not capable of being unilaterally waived unless it is for the exclusive benefit of the party wishing to waive it
  • The fact that both parties have the right to terminate the contract in the event of non-satisfaction of the condition may not be enough to show that the condition is of mutual benefit
  • Waiver may not be possible if the other side has already exercised a right to terminate the contract

Where a contract is conditional, one of the parties may decide that they want to waive a condition. However, it is not always that straightforward. In the absence of an express power of waiver, a party may not always be able to unilaterally waive a condition.

Facts of Irwin v Wilson

In Irwin v Wilson, the parties exchanged contracts for the sale of a residential flat. Unfortunately, at the time when the flat lease was granted, the plan had been transposed with that of a neighbouring flat, and both leases were consequently registered at Land Registry with the wrong plans. The sale contract therefore provided that:

  • Completion was to be 14 days after the seller's solicitors had provided the buyer's solicitors with documentation showing that both plans had been amended at Land Registry (clause 25.1)
  • If the seller, having used all reasonable endeavours, was not able to provide the documentation referred to in clause 25.1 by 1 February 2010, either side could give notice of five working days to terminate the contract, whereupon the buyer was to vacate the property and the seller's solicitors had to return the deposit (clause 25.2).

It was common ground that the seller had used reasonable endeavours to provide the information required by the condition, but had been unable to do so by 1 February. On 2 February the seller served notice on the buyer terminating the agreement pursuant to clause 25.2. The notice expired on 9 February.

On 9 February, the buyer gave notice waiving the condition, and requesting a completion statement.

Issues

The court had to determine several issues:

(1) Whether clause 25.1 was capable of being waived by the buyer

In the absence of an express power of waiver, a contractual condition is not capable of being unilaterally waived unless it is for the exclusive benefit of the party wishing to waive it.

If the condition at clause 25.1 was performed, such that the sale would then complete, the seller would have no interest in the property, and defects in his former title would cease to be of concern. The court therefore found that the condition was included for the buyer's sole benefit.

The fact that both parties had the right to terminate the contract in the event of non-satisfaction of the condition did not affect this conclusion.

(2) If clause 25.1 was capable of being waived by the buyer, how would the completion date be determined?

Under clause 25.1, completion was to be 14 days after satisfaction of the condition. How, then, would completion be calculated if the condition was waived? Although the Standard Conditions of Sale deal with the fixing of a completion date, the relevant conditions had been disapplied by the contract.

The court considered that there were two alternative solutions. The first was to treat the waived condition as if it had been performed. On this interpretation, completion would be 14 days after the date of waiver.

The alternative interpretation would be to view the contract as if it had never contained the condition. In this case, the contract would be silent as to the completion date. However, at common law, completion must be within a reasonable time. The court would therefore step in to supply the completion date, calculated on the basis of what needed to be done to complete the contract. The court thought that the same 14-day time period would be appropriate. In any event, a reasonable period would have passed by the time the buyer issued proceedings for specific performance on 9 April.

(3) Could the buyer waive the condition after the seller had given notice to terminate the contract?

The seller contended that, even if the condition at clause 25.1 was capable of being waived by the buyer, it could not do so after the seller had served notice under clause 25.2 to terminate the contract.

The seller argued that its notice was effective to terminate the contract. The five working day notice period allowed under clause 25.2 was simply to allow the buyer time to vacate the property, and for the seller to repay the deposit.

The buyer argued that a termination notice served by the seller was effectively a notice putting the buyer to his election as to whether or not he wished to exercise his right to waive the condition. (Similarly, if it was the buyer serving a termination notice, the buyer argued that this would give the seller a final five working days in which to satisfy the condition.)

The court applied the case of Akzo Nobel UK Ltd v Arista Tubes Ltd and ruled that an obligation to complete could not arise once a valid termination notice had been served. It was too late for the buyer to waive the condition and the seller had validly terminated the contract.