The effectiveness of “no-waiver” clauses: protecting against estoppel and waiver defences

In our Law-Now last week (see here) we considered the use of waiver and estoppel defences to claims notification provisions. In this Law-Now, we consider the extent to which “no-waiver” clauses are able to prevent reliance on such defences. The English law approach to such clauses has undergone significant development since a Supreme Court decision in 2018. In what follows, we provide a detailed overview of the types of “no-waiver” clauses which have been considered by the English courts and the varying degrees to which they have successfully prevented reliance on waiver and estoppel defences. 

Introduction

Large construction contracts are typically administered for employers and contractors alike by project managers or engineers within defined project teams. Throughout the course of a project, these personnel will discuss a broad range of issues, including technical matters, financial details and the legal merits of particular positions adopted by either party. As they are appointed by the parties and given responsibility for the management of such issues, these personnel will usually have authority to conclude agreements on behalf of the parties or to make statements which have legal effect under the relevant construction contract. Given that project level discussions often take place informally, risks arise that agreements or statements may be made without proper consideration or without prior approval of senior management. Or, as discussed in our previous Law-Now (see here), the project team may overlook defences available to an employer resulting in arguments that those defences have been waived. So called “no oral modification clauses” (“NOM clauses” for short) and “no-waiver” clauses are often included within construction contracts to protect against these risks.

NOM clauses will typically seek to preclude the making of variations or amendments to a contract unless certain formalities are followed. A popular form is to require that any amendment be “in writing and signed by the parties”. “No-waiver” clauses are similar and will usually seek to preclude informal waivers of rights by stating that any waiver must be in writing and signed by the party concerned. In a construction context, NOM clauses are often drafted to preclude payment for varied or additional work unless agreed or instructed in writing by the employer or the employer’s engineer or architect.

The effectiveness of these clauses has long been questioned on the basis that freedom of contract requires that parties be able to make new contracts through whatever means they choose and they cannot therefore put beyond their power their ability to do so in the future. Others argue that by giving effect to them the courts are upholding an exercise of the parties’ freedom of contract. In 2018, this debate was decisively determined in favour of upholding such clauses by the UK Supreme Court in Rock Advertising Ltd v MWB Business Exchange Centres Ltd.

Rock Advertising: a recap

Rock Advertising involved a licence agreement for office space for a fixed term of 12 months. The licence contained a NOM clause in the following terms: “All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.”

Six months later, the director of the licensee (Rock Advertising) had a telephone conversation with a credit controller from the licensor (MWB) about payment arrears. The court at first instance found that, during this conversation, a variation to the payment schedule was agreed. However, MWB treated the variation as merely a proposal and ultimately rejected the varied schedule. It then proceeded to lock Rock Advertising out of the premises for failure to pay the arrears and terminated the licence.

The Supreme Court upheld MWB’s position, finding that the NOM clause was effective against the oral agreement relied on by Rock Advertising. The Court disagreed that the making of such an oral agreement implicitly dispensed with the NOM clause:

“What the parties to such a clause have agreed is not that oral variations are forbidden, but that they will be invalid. The mere fact of agreeing to an oral variation is not therefore a contravention of the clause. It is simply the situation to which the clause applies. … The natural inference from the parties’ failure to observe the formal requirements of a No Oral Modification clause is not that they intended to dispense with it but that they overlooked it. If, on the other hand, they had it in mind, then they were courting invalidity with their eyes open.”

The Court also considered the potential for injustice to arise where oral agreements in contravention of an anti-variation clause have been acted upon by the parties who then find themselves unable to enforce the agreement. The Court left open whether the doctrine of estoppel might assist a party in such circumstances, although at the same time identifying a number of difficulties lying in the path of such an argument:

“In England, the safeguard against injustice lies in the various doctrines of estoppel. This is not the place to explore the circumstances in which a person can be estopped from relying on a contractual provision laying down conditions for the formal validity of a variation. The courts below rightly held that the minimal steps taken by Rock Advertising were not enough to support any estoppel defences. I would merely point out that the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty for which the parties stipulated when they agreed upon terms including the No Oral Modification clause. At the very least, (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself …”

“No-waiver” clauses

Sumitomo

One of the first English cases to apply Rock Advertising to a “no-waiver” clause was Sumitomo Mitsui Banking Corporation Europe Ltd v Euler Hermes Europe SA (Nv). Sumitomo concerned a PFI waste treatment project in Derby, England. The construction sub-contractor provided a performance bond and retention bond to the SPV project company, which fulfils a main contractor role under a PFI contract structure (“ProjCo”). ProjCo assigned its rights to the bonds to a security trustee under the terms of a debenture agreement. The performance bond permitted such an assignment subject to the “assignee confirming to the Bondsman in writing its acceptance of the Employer’s repayment obligation pursuant to clause 8”. Clause 8 obliged ProjCo to repay to the Bondsman any amounts found by a court to have been overpaid under the bond.

The security trustee sent a Notice of Assignment to the Bondsman, but did not confirm its acceptance of the repayment obligation in clause 8. The Bondsman signed a duplicate of the notice noting: “We acknowledge receipt of the notice of assignment of which this is a copy and confirm each of the matters referred to in the notice of assignment.”

The security trustee subsequently claimed under the performance bond and the Bondsman argued that there had been no valid assignment due to the failure to confirm acceptance of the repayment obligation under clause 8. The security trustee claimed this requirement had been waived by the Bondsman’s acceptance of the Notice of Assignment. The Bondsman relied on a “no-waiver” clause in the Performance Bond as follows:

“12. Non-Waiver

12.1 No failure or delay by either party in exercising any right or remedy under this Bond shall operate as a waiver; nor shall any single or partial exercise or waiver of any right or remedy preclude the exercise of any other right or remedy, unless a waiver is given in writing by that party.

12.2 No waiver under clause 12.1 shall be a waiver of a past or future default or breach, nor shall it amend, delete or add to the terms, conditions or provisions of this Bond unless (and then only to the extent) expressly stated in that waiver.”

The court interpreted clause 12.2 as requiring a waiver to expressly identify the past or future default or breach being waived, or the particular terms being amended, deleted or added to. The Bondsman’s acceptance of the Notice of Assignment did not contain such an express waiver and clause 12.2 had not therefore been fulfilled. The Supreme Court’s decision in Rock Advertising required such terms to be given effect to and the assignment was, therefore, invalid.

GPP Big Field

Similarly, in GPP Big Field LLP v Solar EPC Solutions SL, a “no-waiver” clause stated that contractual rights “may be waived only in writing and specifically”. GPP had entered into five EPC contracts with a contractor for the construction of solar power generation plants at various locations in the UK. The projects ran into problems and GPP claimed for delay related losses (among other things).

The EPC contracts all contained liquidated damages provisions covering delays in commissioning (“LDs”). These stated that the liquidated damages amounts “shall be paid in the way that the amount of the [LDs], as accrued up to the date of the next invoice of the Contractor …, shall be deducted from said invoice”. The contractor argued that this was a mandatory mechanism for the recovery of LDs and that, by failing to deduct LDs from invoices, GPP had waived its entitlement to the LDs. Applying Rock Advertising, the English Commercial Court found that any such waiver was precluded by the “no-waiver” clause.

Notting Hill Genesis

Two more recent cases over the past year have clarified the scope of particular forms of “no-waiver” clause. In URE Energy Ltd v Notting Hill Genesis, the “no-waiver” clause provided that: “No delay or omission by either party in exercising any right, power or remedy under this Contract shall be construed as a waiver of such right, power or remedy…”. The English Commercial Court held that in applying Rock Advertising, such a clause only applied to “the negative sin of omission, i.e., pure delay or omission, and did not preclude reliance on positive acts such as a demand for contractual performance from a counterparty”.

URE Energy Ltd (“URE”) had submitted a successful bid to a local housing association for a long term 25 year contract for the supply of low cost electricity from renewable sources (the “PPA”). The lengthy contract term was needed to underwrite the construction of a 5 megawatt solar farm from which the electricity would be supplied. The parties were not in a position to execute the PPA immediately and entered into a 4-year short-term contract whilst the PPA was being negotiated. Neither party was obliged to enter into the PPA at this stage.

Approximately 9 months later, the housing association was amalgamated with another association (together, “Genesis”). This gave URE a right to terminate the short-term contract, but instead it continued to supply electricity under it. URE also continued to pursue negotiations over the PPA and to exercise a right of access for the installation of smart-meters. A further six months later, Genesis advised URE that it no longer intended to proceed with a long-term PPA. URE then sought to terminate due to the amalgamation. Genesis contended that URE had waived the right to terminate by its continued performance of the contract.

In the Court’s view, URE’s conduct after the amalgamation was sufficient to amount to a waiver notwithstanding the “no-waiver” clause quoted above. Whilst the mere continued supply of electricity may not have been sufficient, “positively calling upon [Genesis] to co-operate in relation to the AMR rollout and continuing to negotiate for the [PPA] was sufficient positive conduct to amount in principle to … a waiver notwithstanding [the “no-waiver”] clause”.

Barclays Bank

The drafting of the “no-waiver” clause in Barclays Bank PLC v VEB.RF was cast in broader terms as follows:

“(b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system.”

The defendant in that case argued that the requirement that a waiver be “executed by each of the parties” meant the clause was limited to waiver by agreement and not to unilateral waivers resulting from the words or conduct of one party. The English Commercial Court was unpersuaded by this interpretation:

“I do not see why in principle the parties' agreement should not be given effect to as a starting point – that is that it was agreed between the parties that no waiver that would be effective unless (a) it was in writing and (b) executed by each of the parties. … There was no reason why the parties should not adopt [Rock Advertising] in relation to waivers, if that is what they chose to do. … Such a provision avoids any attempt to undermine the written agreement, it avoids a dispute as to the scope of any waiver and it makes it easier to give effect to internal rules concerning the modification of contracts.”

Waiving a “no-waiver” clause

As noted above, Rock Advertising leaves open the prospect of a NOM clause being waived through the doctrine of estoppel. However, more is required than mere evidence of the informal variation itself. At the very least, “there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality”. 

The same requirement has consistently been found to apply to “no-waiver” clauses. For example, in Sumitomo, the English Commercial Court noted:

“if it is said that waiver prevents reliance on a no waiver clause there would have to be something which indicated that the waiver was effective notwithstanding its noncompliance with the non-waiver clause and something more would be required for this purpose than what might otherwise simply constitute a waiver of the original right itself.”

Most recently, in the Barclays Bank case referred to above, the English Commercial Court noted that: 

“for the defendant to succeed in its waiver claim it would have to show that the claimant had unequivocally represented that what is alleged to be a waiver was valid notwithstanding its informality and would have to do so by reference to something more than what is alleged to constitute the waiver.”

It is worth recalling that conduct which is alleged to constitute a waiver will itself need to be unequivocal. Circumstances in which a “no-waiver” clause can be overcome will therefore require clear words or conduct giving rise to the waiver as well as equally clear words or conduct showing that the “no-waiver” clause was not to apply. One recent case has, however, suggested an alternative and less-onerous route for overcoming “no-waiver” clauses.

In Kodrič v Bitstamp Holdings NV (Rev1), Mr Kodrič sought to challenge the exercise of a call option under a shareholders agreement (the “SHA”) by Bitstamp Holdings NV (“Bitstamp”) requiring Mr Kodrič to sell his shares in a Bitstamp subsidiary. The call option only remained valid whilst the shares were held by Mr Kodrič or a “Permitted Transferee”, which included transfers to relations or to a family trust. Prior to the exercise of the call option, Mr Kodrič wished to transfer his shares to a Luxembourg entity (“White Whale”) over which he had control. Bitstamp’s approval was required for this transfer and was obtained on the faith of representations by Mr Kodrič and his lawyers that White Whale was a family trust.

White Whale was not a family trust and Mr Kodrič sought to rely on this fact to argue that the call option was no longer exercisable after the shares had been transferred to White Whale. Bitstamp claimed that Mr Kodrič was estopped from denying that White Whale was not a Permitted Transferee as a result of the representations made when seeking Bitstamp’s consent to the transfer. Mr Kodrič, in turn, relied on the following “no-waiver” clause in the SHA (in similar terms to the GPP Big Field case):

"The rights of each party under this deed may be exercised as often as necessary, are (unless otherwise expressly provided in this deed) cumulative and not exclusive of rights and remedies provided by law and may be waived only in writing and specifically".

Despite this clause, the English Chancery Court upheld the estoppel asserted by Bitstamp. The Court noted that the guidance as to estoppel in Rock Advertising had in mind an estoppel arising from an informal promise or agreement to vary a contract. However, there was “a potential difference between an estoppel as to the existence of a fact and an estoppel arising from an informal promise or agreement to vary a contract.” The estoppel relied upon by Bitstamp did not, in the Court’s judgment, waive or modify the underlying contractual obligations:

“[The “no-waiver” clause] expressly preserves rights and remedies provided by law, at least if they do not impinge on the intention that any waiver of rights is to be in writing. When the parties acted on the common assumption or representation that White Whale was a Permitted Transferee neither [Bitstamp] nor Mr Kodrič waived any rights they had under the SHA or Side Letter. They did not modify the SHA or the Side Letter in any way. A determination by a Court that Mr Kodrič is not permitted to deny that White Whale was a Permitted Transferee would have implications for the legal rights that flow from the Side Letter and SHA, but that flows from a remedy provided by law, and the Court's determination, not a mutual dealing between the parties which [the “no-waiver”] clause … requires to be in writing.”

The same conclusion applied to a NOM clause in the SHA:

“It defines which parties can make certain types of amendments to the SHA; some require the approval of all shareholders, some do not. Such amendments have to be in writing. But there was no amendment of the SHA at the time of the White Whale transfer. A determination by a Court that Mr Kodrič is not permitted to deny that White Whale was a Permitted Transferee simply does not engage clause 22.1.”

This is a potentially significant exception to the estoppel requirements laid down in Rock Advertising. The distinction is essentially one between an estoppel which prevents a party from contesting that contract requirements have been complied with, and one which prevents a party from contesting that those requirements have been changed or modified. The application of such a distinction would focus considerable attention on the precise words used for any alleged waiver or estoppel. For example, if instead of representing that White Whale was a Permitted Transferee, Mr Kodrič had represented that White Whale would be treated as if it were a Permitted Transferee, the difference would appear to be decisive. This altered representation would be one as to the application of the SHA, which the “no-waiver” clause would prevent reliance on, as opposed to one merely as to a factual state of affairs falling outside the clause. 

The distinction between these two types of statement may in some cases depend on the precise form of words used, which may depend on disputed oral evidence. In such circumstances, the distinction might be said to run contrary to the purpose for which NOM and/or “no-waiver” clauses have been included in the contract i.e. to avoid collateral attacks on the wording of the contract by reference to oral discussions. As noted in Rock Advertising, “the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty for which the parties stipulated when they agreed upon terms including the [NOM] clause”.

Support for the court’s reasoning in this case might, however, be drawn from the particular drafting of the “no-waiver” clause in question. The requirement for waivers to be specific and in writing is limited in the opening words of the clause to the “rights of each party under this deed”. This might be said to support the court’s finding that an estoppel preventing Mr Kodrič from alleging that White Whale was not a Permitted Transferee on the basis that such a waiver was not one strictly in relation to rights under the SHA. By comparison, the “no-waiver” clause in Barclays Bank was cast in broader terms, referring to a “waiver in respect of this Agreement”. Such a more broadly drafted clause might well have prevented the conclusion reached by the court in this case.

Conclusion and implications

The above discussion shows that “no-waiver” provisions are being enforced by the English courts, but that variations in drafting are important. In particular:

• Clauses which merely refer to the delay in exercising, or the omission to exercise, certain rights as not amounting to a waiver are likely only to provide minimal protection. Waivers arising from positive acts will be unaffected (as in URE Energy).
   
• Providing that waivers must be “express” or “specific”, in addition to being in writing and signed, will provide added protection by preventing arguments that certain documents have impliedly given rise to a waiver (as argued in Sumitomo).
   
• The fact that a “no-waiver” clause requires waivers to be signed by both parties will not necessarily limit the clause to waivers by agreement (as argued in Barclays Bank), but it would be prudent for this point to be clarified expressly in the drafting if possible.
   
• Attention should be given as to how waivers are described. A clause which refers broadly to waivers “in relation to” or “in connection with” an agreement are more likely to avoid the difficult arguments as to different categories of estoppel which succeeded in overcoming the “no-waiver” clause in Bitstamp.

It remains to be seen whether the Bitstamp distinction between factual estoppels on the one hand and estoppels which modify contractual obligations on the other will be accepted in future cases. In the meantime, Bitstamp provides some scope for parties to seek to overcome no-waiver clauses, particularly where the drafting limitations present in that case have not been improved upon.

* This is an abridged version of an article originally featured in the 2025 CMS Annual Review of English Construction Law Developments. To download a copy of the Annual Review, please click here.

References:

Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24;

GPP Big Field LLP v Solar EPC Solutions SL [2018] EWHC 2866 (Comm);

Sumitomo Mitsui Banking Corporation Europe Ltd v Euler Hermes Europe SA (Nv) [2019] EWHC 2250 (Comm);

Kodrič v Bitstamp Holdings NV (Rev1) [2022] EWHC 210 (Ch);

URE Energy Ltd v Notting Hill Genesis [2024] EWHC 2537 (Comm);

Barclays Bank PLC v VEB.RF [2024] EWHC 3088 (Comm)