Online Reporter
Trust Maanda
Legal Position
IN terms of the law, a party can elect to cancel an agreement where the other party is in breach.
That right to cancel must be exercised timeously and if not, the right is lost.
The loss of that right may be due to inaction on the part of the innocent party.
A party may lose the right to cancel the agreement either through estoppel, tacit variation, election or waiver.
These principles can be used to defeat an innocent party’s right to cancel an agreement.
The principles of estoppel, waiver and election, sometimes principles of law often overlap.
For example, where the seller has consistently accepted late payments of instalments of purchase price in the past; he or she has waived the exercise of his or her rights under the right to cancel on previous occasions.
A claim for cancellation may be defeated by the invocation of estoppel, election, waiver and tacit variation.
Estoppel arises for example, if a creditor who continuously accepts defective performance from the debtor loses his right of cancellation for past breaches.
He can regain this right only by giving the other party notice that he will in future insist strictly on performance as stipulated in the contract.
Acceptance of late payment of rentals, for example, by a landlord may be regarded a tacit variation of the contract.
Failure by the landlord to cancel within a reasonable time may justify an inference that the contract has been affirmed, or that the right to cancel had been waived.
Where a landlord keeps accepting late payment of rentals, he loses his right to cancel, or resile from the agreement by consistently accepting late, insufficient and varying amounts as payments under the contract.
Whether one characterises such conduct as estopping him from repudiating the contract or as constituting waiver or election makes practically little difference.
Waiver and election in practical terms amount to the same thing: An election to remain in the contract when the other party is in breach of it has been said to be a waiver in the sense of a unilateral juristic act by which the innocent party who has a right to resile abandons this right to cancel on the basis of that breach.
The concept of election when a party to a contract exercises a choice between inconsistent alternatives, by deciding either to cancel or to uphold the contract.
Another example is where an insurer considers a claim, tendered out of time. It would have acted in a manner inconsistent with its later repudiation of liability. Its silence and inaction constitute a representation that it accepted liability, which it was estopped from denying.
A lessor’s continuous acceptance of late and insufficient payments amounts to condonation of such conduct, which could only be changed upon proper notification that in future the appellant would insist strictly on performance as stipulated in the contract. A reasonable man in the lessee’s position would have known that a long-continued receipt by landlord of late payments of rent without protest would lead lessee into the belief that landlord has no objection to late payments and did not treat them as breaches of contract and would not, without notice, do so in future.
Basically, when an event occurs which entitles one party to a contract to carry out his part of the contract, that party has a choice of two courses. He can elect either to take advantage of the event or he can elect not to do so. He is entitled to a reasonable time in which to make up his mind, but when once he has made his election, he is bound by that election and cannot afterwards change his mind.
If the innocent party to the contract elects to abide by the contract, he cannot thereafter rescind it for the original breach. Thus, a tacit election to affirm the contract may be viewed as a form of waiver. Election generally involves a waiver. One right is waived by choosing to exercise another right which is inconsistent with the former.
The doctrine of election is that when an event occurs which entitles one party to a contract to refuse to carry out his part of the contract, that party has the choice of two courses. He can either elect cancel or he can elect not to do so. If, with knowledge of the breach, he does an unequivocal act which necessarily implies that he has made his election one way, he will be held to have made his election that way.
The point made herein is that when one party is in breach, the other party who has a right to act on the breach and cancel the agreement forfeits the right to do so if he elects not to exercise that right, and the manifestation of that election may be by conduct.
Trust Maanda is a legal practitioner and a partner at Maunga Maanda And Associates. He writes in his personal capacity. He can be contacted on +263772432646.
