The Lawletter Vol 42 No 3
Brad Pettit, Senior Attorney, National Legal Research Group
"[A]n implied waiver of nonperformance under a contract will be established by a party's conduct inconsistent with the assertion of the right to the performance allegedly waived, or by conduct that indicates that strict compliance with the contract will not be required, provided that the conduct manifests the requisite intent to waive the right to performance or has induced the requisite reliance by the other party." 13 Williston on Contracts § 39:30 (4th ed.) (Westlaw current through May 2015 Update) (footnotes omitted). For example, a lessor who regularly accepts late payments may establish a course of performance or "an order of business," which operates to waive, as to future payments, a provision making time of the essence and to preclude that party from enforcing a forfeiture. Id. It is also a principle of contract law that "[u]nless otherwise agreed, a course of dealing between the parties gives meaning to or supplements or qualifies their agreement." Restatement (Second) of Contracts § 223 (1981) (Westlaw current through Oct. 2016 Update).
In the landlord-tenant context, "[a] landlord may expressly or impliedly waive the tenant's failure to perform a promise [and] [t]his waiver will deprive him [or her] of the remedies otherwise available for the tenant's default." Restatement (Second) of Property: Landlord and Tenant § 13 cmt. f (1977) (Westlaw current through Oct. 2016 Update). For example, "[a] landlord may waive his [or her] right to the prompt payment of rent by acting in such a manner that the tenant is led to believe that a later date of payment than that specified in the lease is acceptable." Id. § 12.1 cmt. c.
Courts have recognized that a landlord can waive his or right to enforce a clause in a lease that requires the tenant to pay a fine or penalty in the event the tenant is late in making a rent payment. Eo v. Trane, 213 Or. App. 381, 160 P.3d 1018 (2007) (under New York law, if a landlord does not notify the tenant in an appropriate manner of its intent to reestablish the method of payment required under the lease, he waives the right to enforce any late charge penalty or forfeiture of the lease because of a failure of payment at the specified time; the customary method of payment will prevail over the method stipulated in the lease); Consumers Distrib. Co. v. Hermann, 107 Nev. 387, 812 P.2d 1274 (1991) (even though there was a non-waiver clause in the parties' lease agreement, the owner-landlord of a rented warehouse was estopped from charging late penalties and interest because the owner-landlord had not computed or demanded payment of late penalties or interest provided for by the lease for the entire five years of lease term); Smith v. Ellerbe, 141 Misc. 2d 699, 534 N.Y.S.2d 100 (Sup. Ct. 1988) (if a landlord fails to notify the tenant that the method for payment of rent or carrying charges that has been established by their course of conduct, which differs from that specified by the lease, will not be permitted to continue, the landlord waives right to enforce any penalty or forfeiture because of a failure of payment at the specified time); Bettelheim v. Hagstrom Food Stores, Inc., 113 Cal. App. 2d 873, 249 P.2d 301 (1952) (even though a lease expressly required that any waiver of terms and conditions had to be in writing, a business tenant that held-over during lease negotiations and paid the usual rentals with the landlord knowing that the tenant was paying them on the assumption that they were full payment, the court held that the landlord waived the penalty clause in the expired lease that called for increased rentals in the case of a hold-over by the tenant).
The authorities cited indicate that if the evidence shows that a landlord has accepted late rent payments without seeking to collect a fee or penalty from the tenant, the latter may be able to invoke the doctrines of estoppel and waiver against the landlord as affirmative defenses to an action by the landlord to enforce a provision in the parties' lease agreement that imposes a fee or penalty for tardy rent payments.
