Excuses for Nonperformance: Conditions Following Contract Formation
Restatement 2d of Contracts, § 238 (2nd 1981). Finally, a condition subsequent is a future event or fact that, when
fulfilled, dismisses a party’s performance obligation. For example, if a contract requires a buyer to return goods to a
seller if they are defective, the buyer’s return serves to dismiss his or her payment obligations.
Excuse of Condition by Waiver
A party can choose to waive (i.e., excuse) an express or implied condition. A waiver is the intentional
relinquishment of a known right. Waivers are commonly entered into by parties to an agreement when one party is
looking to obtain a one-time release from the other party with respect to a contractual obligation, and the other party
agrees to grant it. This is an appropriate course of action when the parties are not looking to permanently amend a
provision of the underlying agreement, but solely to grant this one-time release, such as waiving a condition. For
information respecting amendments, see “Modification/Amendment” in Later Agreements below.
A waiver can be provided on a revocable basis. Once the receiving party has reasonably relied on it, however,
revocation is no longer permitted. Waivers can also be made either orally or in writing. Commercial contracts
routinely incorporate a waiver clause addressing the manner in which the parties may waive a provision or multiple
provisions of the agreement. Waiver clauses are typically found in the “Miscellaneous” section at the end of an
agreement. Most of these clauses require waivers to be made in writing and signed by either all of the parties to the
agreement or “the party to be charged” (i.e., the party against whom the waiver is to be enforced). These clauses,
sometimes referred to as “no-waiver” clauses, generally state that waivers are not permitted unless made pursuant
to an executed writing. For form waiver clauses, see Waiver Clauses.
The purpose of a waiver clause is to prevent a party from accidentally or unintentionally waiving its right to bring
claims and recover damages under an agreement in the event of a breach by the other party. However, parties to
an agreement commonly waive certain terms throughout the course of their relationship without preparing and
executing a waiver agreement, even when a no-waiver clause existed in the underlying contract. In such instances,
courts regularly uphold oral waivers based upon the parties’ actions and words, even when the underlying
agreement required a waiver to be made pursuant to an executed writing. For example, in Quality Products &
Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362 (2003), a dispute arose between an employer and its
employee. The applicable employment agreement contained a no-waiver clause. The parties, however, mutually
agreed to amend certain terms of the employee’s employment. The court supported the oral modification, holding
that “parties to a contract are free mutually to waive or modify their agreement through written and oral agreements,
as well as through conduct, notwithstanding the presence of a non-waiver clause purporting to restrict that ability.”
The court, however, imposed a heightened standard for determining the parties’ mutual intent to make any such
waiver (i.e., that such intent be established by “clear and convincing evidence”). This is not, however, the case with
sales of goods contracts, which are governed by the Uniform Commercial Code (UCC). Specifically, U.C.C. § 2-209
gives full effect to waiver clauses and does not enforce oral waivers. Similarly, when the statute of frauds (which
requires certain agreements to be made in writing) applies pursuant to U.C.C. § 2-201, oral waivers are generally
not enforced. Best practices dictate preparing the written documentation required pursuant to the underlying
agreement in all instances.
Supervening Events
A supervening event can also serve to dismiss a party’s performance obligation. A supervening event is one that
occurs after an agreement has been fully executed but prior to the time performance is due. In order for a
supervening event to excuse performance, the following conditions must be met: (1) the event must have occurred
through no fault of either party; (2) nonoccurrence of the event was a basic assumption of the parties at the time of
contracting (U.C.C. § 2-615 and Restat 2d of Contracts, § 261 (2nd 1981)); (3) the risk of nonoccurrence was not
otherwise allocated to one of the parties either by the agreement’s language (see Risk Allocation, below) or by
operation of law; and (4) the event renders performance either impossible, impractical, or contrary to the purpose of
the agreement (all as discussed below). When making risk-allocation decisions that are not precisely dictated by
statute, courts commonly consider the foreseeability of the event in question. When a party is discharged from