Waiver by estoppel

The other kind of waiver. The difficult one. Though not as perilous as your earnest counsel may have you believe.

Waiver by estoppel is when a party is entitled to exercise close-out rights, but by conduct leads the offending party to believe it will not. It is an outflowering of the great case of Hughes v Metropolitan Railway (1877) 2 App. Cas. 439

Ingredients

• A legal relationship between the “rightsholder” and the “beneficiary” giving rise to rights and obligations;
• A clear representation by the rightsholder that it will not enforce its strict rights — it can be implied but it must be unequivocal In any case the point here is to differentiate between someome representing that they will not enforce a contractual term — entitling a counterparty to rely on that representation — and simply granting an indulgence and not strictly enforcing a term, which will not give rise to a waiver. Let me say that again: simply not enforcing a term does not give rise to an estoppel or a waiver.
• The beneficiary must rely on the representation to its detriment, so as to make it inequitable for the rightsholder to go back on the representation.
• Unlike waiver by election, generally waiver by estoppel is suspensory and not permanent — unless it would be inequitable to allow the waiver to be withdrawn.

See also

• Waiver | Waiver by election | Waiver by estoppel
• Course of dealing under the Uniform Commercial Code
• Estoppel
• No waiver boilerplate clause