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The renunciation of contractual rights
If a party undertakes to renounce its contractual rights, or at least creates in the other party’s mind the reasonable impression that it is doing so, can such a course of action be characterised as a promise? Alternatively, if liability arises in such a situation, does it derive from the reliance placed upon the impression conveyed to the other party? The proper charac terisation of the renunciation of contractual rights is considered in this chapter.
1. Terminology
It is important, before attempting to answer these questions, to note that different English language terms are used to describe an undertak ing (express or implied) by one party not to enforce its contractual rights against the other. These terms have often been used inconsistently and interchangeably, making analysis of this area of law very difficult. There are some general patterns of usage of terminology which can be discerned, though if European private law is at some stage to be harmonised this is one area where uniformity of terminology would be of great benefit.
Where the undertaking occurs by means of a valid contract, contrac tual variation, or unilateral act, it is common for one of the following terms to be used to describe the undertaking: renunciation, release, discharge, remission, acceptilation,1 pactum de non petendo,2 or the more generic ‘alteration of contract’ (a term which is evidently capable of describing more than just alterations which have the effect of releasing a contracting party from a duty). Where the undertaking arises not by virtue of a valid contract or unilateral undertaking, but nonetheless by virtue of conduct
1The term deriving from Roman law’s acceptilatio, an oral form of the dissolution of an obligation.
2A term used to describe agreements not to enforce rights temporarily, rather than cases of the absolute discharge of the debtor.
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of the party deemed to have given the impression that it was renouncing its rights, the circumstances are more often referred to as personal bar, promissory estoppel, waiver, or acquiescence.
Some of the terms encountered (such as renunciation and waiver) are more suggestive of a unilateral act by the party renouncing its rights, whereas other terms (such as release and discharge) are more suggestive of a consensual arrangement as the basis of the renunciation, but one should not assume that the use of a particular term necessarily imports what it might appear to suggest, as the terminology used is not always consistent with the nature of the underlying act. Sometimes a term (for instance, renunciation, release and discharge) may be more suggestive of an under taking that is intended wholly to extinguish the creditor’s rights, whereas others (such as personal bar, waiver and estoppel) of a mere undertaking not to enforce rights pro tem. Whether a bilateral or unilateral arrange ment is meant, and whether it is to be permanent or merely temporary, is ultimately a question of interpreting what was intended by the parties, though this can be a tricky matter. Does, for instance, a landlord who gives a struggling commercial tenant a rent rebate for six months intend to renounce entirely the claim for the unpaid rent, or merely to postpone collection of it until a later date? Clearly, examination of the words used, as well as all the surrounding circumstances of the case (where this is per mitted), will be crucial in answering such a question.
Sometimes the party in whose favour a renunciation operates will not be given any right to raise a claim against the renouncing party, but only a defence which it can raise if enforcement of the rights is sought. This effect often, depending on the jurisdiction in question, follows from the charac terisation of the renunciation as arising from the conduct of the relevant party (as is the case with ‘personal bar’ or ‘estoppel’, discussed below).
In theory any type of contractual right might be renounced by the creditor, whether it be to payment, to enforce some other performance, to damages for late, defective, or non performance, to terminate for breach, to refer a matter to arbitration, or as to some other matter. There may, however, be statutory restrictions on the right to waive in specific circum stances, for instance restrictions designed to protect a consumer from waiving his rights.
2. Bilateral or unilateral renunciations
In Roman law, the release of a contractual debtor was a bilateral act, achieved (apart from by performance) either under a pactum de non
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petendo (which operated not to extinguish the rights in question, but merely as an undertaking by the creditor not to enforce them) or by means of an acceptilatio (an oral question and answer, much like the stipulatio, which extinguished the debt).3
In modern legal systems which recognise unilateral promises whether generally or exceptionally, it may be possible to see an express renunci ation of rights in either a promissory or a contractual way. But even in systems where a unilateral promise is not conceived of as a species of obligation, the concept of a unilateral juridical act may be utilised to explain a renunciation of rights which takes effect unilaterally, without the cooperation of the debtor. Those systems which permit a unilateral release by a creditor of a debtor’s obligation include Scotland, Spain, Italy and the Nordic countries, a position also adopted in the PECL and the DCFR.4 By contrast, France,5 Germany,6 the Netherlands7 and Switzerland,8 among others, permit release of a debtor only by agreement of the parties, this also being the position adopted in the Unidroit Principles of International Commercial Contracts (the PICC).9 Whilst growing toleration of a unilateral approach has been observed,10 this trend seems to amount to no more than the practice of presuming an acceptance to an offer of release rather than as a strictly genuine unilat eral form of release.
Those jurisdictions which require the agreement of creditor and debtor, and thus reject a unilateral characterisation of release, often cite the con cern that a benefit should not be thrust on an unwilling beneficiary, though a right of rejection of an unwanted benefit is as amenable to avoid ing such an outcome as is a requirement of acceptance of a renunciation.11 However, because, in the case of gratuitous releases, many jurisdictions deem an acceptance to have been given where an offer of release is not
3
4
5
7
Zimmermann, Law of Obligations, pp. 754–8.
For Scotland, see discussion below at p. 434; for Italy, Codice civile Art. 1236; PECL Art. 2:107; DCFR Art. II.-1:103(2).
For the French position, see Terré et al., Droit civil, no. 1459. 6 §397 BGB. BW Art. 6:160(1). 8 Code of Obligations Art. 115. 9 Art. 5.1.9.
10See Kleinschmidt, ‘Erlass einer Forderung’.
11Such a right of rejection exists in Scotland and Italy (for Italy, see Codice civile Art. 1236). There may be rare cases where release of a debtor from an obligation may make the debtor worse off overall, so that he will wish to refuse the ‘benefit’ of such a release, though it is hard to imagine what the facts of such cases might be. More conceivably, a debtor may have a moral reason for not wishing to be released from his debts, namely that he considers it consistent with honesty and good faith that he discharge in full duties he has undertaken.
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rejected, the strictly bilateral model tends to be unilateral in its practical application.12
3. Characterising undertakings not to enforce contractual rights
Given the possibility of both unilateral and bilateral characterisations of renunciations of rights, this means that, in cases where there is an express undertaking not to enforce contractual rights, there are a number of dis tinct possible ways of analysing what is happening:13
(1)the contractual conception: the contracting parties may be seen as having, by means of a contractual amendment or a further contract, altered the original contract to provide for a renunciation of a right, such a course of action requiring the distinct assent of both parties. Where the party in whose favour the renunciation is conceived agrees immediately, then a contractual variation clearly occurs at once; on the other hand, if the acceptance of this party is not immediately forthcoming, or is not (if permitted) presumed, the question arises of whether some sort of option (to accept the waiver) exists, or whether the offer to renounce may be revoked at the whim of the offeror;
(2)the unilateral promissory conception: the party renouncing its rights may have made a unilateral promise not to enforce those rights in the future;
(3)the unilateral juridical act conception: the party renouncing its rights may be seen as having undertaken, if not any obligation in the form of a unilateral contract or promise, a unilateral juridical act which has the effect of terminating the right in its favour;
(4)the personal bar/estoppel conception: even if none of the first three characterisations can be maintained, the party giving the undertak ing may be ‘personally barred’ or ‘estopped’ from raising any future claim (or have ‘acquiesced’ in the other party’s failure of duty), mean ing that it is precluded from adopting a course of action which would contradict the impression it gave that it would not enforce the rights in question. This usually has the effect that the other party is entitled
12The position of a presumed acceptance prevails statutorily in the Netherlands and Switzerland, and by virtue of decision of the courts in Austria, France, and Germany.
13In fact, there is a further analytical possibility to those listed here, that being that a renunciation of rights can be conceived of as forming part of such a substantial revision of the contract that such revision is considered to be a novation, but this possibility is not considered further in the main text.