Waiver by estoppel

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

Waiver by estoppel is when a party is entitled to exercise contractual rights, but by its conduct leads the other party to believe it will not so that party relies on that representation to its detriment. 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 someone 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. The latter will not give rise to 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generally waiver by estoppel is suspensory and not permanent — unless it would be inequitable to allow the waiver to be withdrawn.

Observations

• A representation must be some kind of positive act: Simply not enforcing a term does not give rise to an estoppel or a waiver: “It is difficult to imagine how silence and inaction can be anything but equivocal”.
• The estoppel is specific to the particular circumstance. If you have a recurring right (you know, like to make a margin call), then just because you waived it once — even if you somehow permanently waived it — that doesn't mean you have waived it for all time. Just because you didn’t enforce this time, that doesn’t mean you are prevented from ever enforcing in the future.

See also

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