A recent case before the UK High Court has emphasised the need for contracting parties to ensure that they do not inadvertently waive their contract rights.
In the case of Tele2 International Card Co & others v Post Office Limited, Tele2 International Card Co (Tele 2) entered into an agreement with the Post Office to provide prepaid phone cards and other services. One of Tele2’s obligations was to provide the Post Office with a letter from its parent company prior to the start of each calendar year. Failure to do so constituted a material breach entitling the Post Office to terminate the agreement. In December 2003 Tele 2 failed to provide the letter but continued to perform in all other respects. In December 2004 served a written notice to terminate the agreement on the basis that Tele2 had failed to provide the letter due in December 2003. Tele2 countered that the agreement had been affirmed by the Post Office since they had delayed in giving notice for 11 months. The Post Office sought to rely on the following “no waiver” clause in the agreement:
“In no event shall any delay, neglect or forbearance on the part of any party in enforcing (in whole or in part) any provision of this Agreement be or deemed to be a waiver thereof or a waiver of any other provision or shall in any way prejudice any right of that party under this Agreement.”
In the first instance, the High Court ruled that this non-waiver clause prevented the Post Office from losing its right to terminate through any delay in enforcing such rights. The trial judge noted that but for this clause the likely ruling would have been that the Post Office had affirmed the contract by reason of its conduct. The Court of Appeal reversed the High Court decision. It held that:
- The continued performance by the Post Office (and its acceptance of Tele2’s performance under the agreement) for nearly a year without any protest in relation to Tele2’s failure to provide the parent company letters was a clear and unequivocal communication, by conduct, of the Post Office’s election to affirm the contract and to abandon its right to terminate it for breach.
- The general law requires that a party which has a right to terminate a contract must elect whether or not to do so. The “no waiver” clause in the contract did not disapply this doctrine, so the Post Office was still required to make an election.
While the effectiveness of “no waiver” clauses may be questioned as a result of this case, it is clear that the Post Office’s failure to challenge Tele2 in relation to the breach played a significant part in the ruling that it had lost its right to terminate. By continuing to perform without protest, the Post Office was held to have affirmed the contract. The judgment may well have been different if the Post Office had reserved its rights by making a protest to Tele2 at the time the letter from the parent was due.
Parties should ensure that they do not inadvertently waive their rights by promptly enforcing or reserving their rights if the other side is in breach; they should not rely on the existence of a “no waiver” clause to preserve their rights for them.