Very often construction contracts contain provisions that explicitly require that the parties reduce all modifications to a contract into writing. These “non-waiver” clauses are ostensibly written to prevent the enforceability of oral modifications to agreements or modifications by contract. Recently, the Maryland Court of Appeals reaffirmed its reluctance to strictly enforce these provisions and instead made clear that the parties to a contract may waive the enforceability of non-waiver clauses.
Hovanian Land Investment Group v. Annapolis Town Centre
In Hovanian Land Investment Group v. Annapolis Town Centre, the Court of Appeals underscored the courts “persistent unwillingness to give dispositive and preclusive effect to contractual limitations on future changes to [a] contract.” This modification can occur by waiving the performance of a condition precedent, subsequent oral or written negotiations or some other conduct. The court separated the waiver of the contract provision at issue and the waiver of the “non-waiver” clause, stating that the party asserting a waiver must prove a waiver of both provisions.
In the context of a construction contract, it is quite common to have a provision that requires modifications to the contract to be in writing. Furthermore, construction contracts often contain multiple provisions called “condition precedents” where one party must undertake some action in order to receive some benefit. For example, the changes provisions often require that the party making a claim for a change must give written notice within a certain number of days of encountering the circumstances creating a change.
Conversely, the contract may require the party ordering the change to also give written notice that a change is being made to the contract. The Hovanian Land Investment Group decision adds further support to the legal reality that the parties can waive these conditions through a course of conduct, acquiescence or mutual agreement. Thus, if the facts demonstrate that multiple verbal directives and agreements existed on many changes to a project, then the court is likely to uphold the validity of subsequent oral agreements concerning changes. In short, the parties, through their conduct, can modify the contract.
As stated in Hovanian, “Maryland law focuses on the actions of the party and will find waiver where the actions or the words of the party clearly indicate such intent. When a contract has a non-waiver clause, a party claiming waiver must show a clear intent to waive both the non-waiver clause and the underlying contract provision. Waiver of a non-waiver clause may be shown through the same actions that prove waiver of the contract clause at issue.” The lesson learned from Hovanian is two-fold: (1) follow your contract if you ultimately intend to enforce it; and (2) if the contract has not been followed and you need to assert a modification look at the parties’ conduct to date as a guide to your rights.
Please contact Matt Hjortsberg at 410-583-2400 or at Hjortsberg@bowie-jensen.com for questions.