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In construction arbitration, one of the most routinely overlooked provisions is the Waiver Clause. Unlike standard commercial agreements, infrastructure contracts (such as NHAI Concession Agreements and EPC contracts) often prescribe strict conditions to give effect to a waiver. A standard waiver clause reads as follows:

"1.1 Waiver, including partial or conditional waiver, by either Party of any default by the other Party in the observance and performance of any provision of or obligations under this Agreement:

(a) Shall not operate or be construed as a waiver of any other or subsequent default hereof...;

(b) Shall not be effective unless it is in writing and executed by a duly authorized representative of the Party; and

(c) Shall not affect the validity or enforceability of this Agreement in any manner.

1.2. Neither the failure by either Party to insist on any occasion upon the performance of the terms... nor time or other indulgence granted... shall be treated or deemed as waiver of such breach..."

As seen in the aforesaid waiver clause, the sub-clause 1.1(b) clearly sets out conditions to give effect to waiver to any party, which is, it should be written and duly authorized. During the performance/execution of work, the parties usually overlook or bypass this conditional waiver prerequisite as per the contract and fail to follow the conditions as stipulated thereto. When disputes later arise, a defending party often faces claims that were never raised during the time of performance. A plea of waiver is usually raised to take defence from such disputes by the defending party and the claiming party may assert that "We never waived our rights in writing as mandated by Clause 1.1(b), so our financial claims remain alive."

Does the failure to execute a written waiver as per the contract actually bar the defending party from taking the plea of waiver?

The law with respect to waiver is no longer res integra. Waiver is a voluntary relinquishment of a known legal right. It is a meeting of minds when one party waives a known right and the other takes the benefit of the same. The most celebrated judgement in this regard is the judgment of the Supreme Court in P. Dasa Muni Reddy vs P. Appa Rao (1974) 2 SCC 725 where the top court held that waiver being an abandonment of known right requires mutual meeting of minds between two parties where one relinquishes the right and the other benefits from the same. But when a contract strictly conditions the effect of waiver being in writing, a party might argue that the general doctrine of waiver which is voluntary relinquishment of a known legal right cannot apply without a written formality as mandated by the contract. Therefore, the applicability of the general law of waiver would no longer be relevant. However, the absence of a conditional written waiver does not grant a party the complete right to ignore its own conduct. When a party passively accepts the benefit of an act or performance without protest or objection, the doctrine of acquiescence and the principle of approbate and reprobate come into play.

The doctrine of acquiescence is a passive acceptance or an implied consent to an act or conduct. In the case of Union of India & Ors v. N. Murugesan & Ors., (2022) 2 SCC 25, the Supreme Court opined that acquiescence presupposes knowledge against a particular act which becomes a tacit or passive acceptance thereof. Meaning thereby, when a known act is voluntarily not performed disregarding its consequences, it effectively amounts to acceptance of the situation through silence or inaction leading to an implied agreement between the parties. A party that has acquiesced through its conduct cannot turn back and insist the compliance of the original terms. The principle of approbate and reprobate prohibits a party from taking inconsistent and contradictory stands. It basically bars a party from accepting and rejecting the same instrument, transaction or right simultaneously and prevents a party from blowing hot and cold at the same time.

As explained above, it is clear that even if there is a conditional waiver as per the contract, the law of acquiescence and the principle of approbate and reprobate cannot be ignored and would principally and legally apply. Even if a party has failed to give conditional waiver as stipulated in the contract, the party having failed to object at that time but having acted upon through its voluntary conduct is barred to raise a claim at a later stage by the principle of waiver by acquiesce. Acquiescence operates outside contractual conditions and creates a fresh, implied agreement that estops the acquiescing party from reverting to original contractual obligations. Further the party is also barred from approbating and reprobating i.e pick and choose an act and repudiate which is disadvantageous at its own convenience.

A simple example of a construction dispute on waiver is illustrated herein for better understanding:-

A and B agreed that the appointed day of work was 10.10.2020 agreeing to discharge and forego all financial claims/liabilities prior to the said date. Thereafter B started work from the appointed date without any protest or objection and had also submitted its monthly progress report acknowledging the appointed date as 10.10.2020. B later at the time of arbitration cannot claim financial implication prior to the appointed date stating that there was no implied waiver in writing as per the contract. The very fact that B started work without protest/objection and had also acknowledged the appointed date is clear acquiescence on its part and even if conditional waiver in writing as mandated by the contract is not adhered to, B is barred from raising financial claims prior to the appointed dated due to the waiver effectuated by the doctrine of acquiescence and also the principle of approbate and reprobate.

Thus, what emerges from the aforesaid discussion is that during construction disputes, if the defending party is able to prove from the conduct of the claiming party that even though there was no written form of waiver, the claiming party had clearly acquiesced to the same through implied accord and conduct by way of its action, continued performance of work without any objection or protest. It can be strongly inferred that the claiming party had waived its right by way of acquiescence. Once this is established, a party is legally barred to take a stand that waiver had to be provided in writing as mandated by the contract. The claiming party would also be further barred from blowing hot and cold. Therefore, in construction contracts even if conditional waiver is not adhered to, the conduct of the party plays a vital role in formulating acquiescence by way of waiver and overriding the conditional waiver clause.

Author is an Advocate at NCT of Delhi. Views are personal.


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