Michigan Supreme Court
Lansing, Michigan 48909
_____________________________________________________________________________________________
C h i e f J u s ti c e J u s t ic e s
Maura D. Corrigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED JULY 31, 2003
QUALITY PRODUCTS AND
CONCEPTS COMPANY,
Plaintiff-Appellee,
v No. 119219
NAGEL PRECISION, INC,
Defendant-Appellant.
___________________________________
BEFORE THE ENTIRE BENCH
YOUNG, J.
This case implicates fundamental principles of contract
law. The primary issue presented concerns the circumstances
under which a contract can be waived or modified, particularly
where the contract protects itself against certain methods of
waiver or modification. At the heart of this inquiry is how
to resolve the tension between the freedom to
contract—specifically, in this case, the freedom to enter into
a contract concerning the same subject as the original
contract—and the provisions of the original contract that
restrict the manner in which the contract’s terms may be
waived or modified.
We hold that parties to a contract are free to mutually
waive or modify their contract notwithstanding a written
modification or anti-waiver clause because of the freedom to
contract. However, with or without restrictive amendment
clauses, the principle of freedom to contract does not permit
a party unilaterally to alter the original contract.
Accordingly, mutuality is the centerpiece to waiving or
modifying a contract, just as mutuality is the centerpiece to
forming any contract.
This mutuality requirement is satisfied where a waiver or
modification is established through clear and convincing
evidence of a written agreement, oral agreement, or
affirmative conduct establishing mutual agreement to modify or
waive the particular original contract. In cases where a
party relies on a course of conduct to establish waiver or
modification, the law of waiver directs our inquiry and the
significance of written modification and anti-waiver
provisions regarding the parties’ intent is increased.
Plaintiff’s evidence establishes only that defendant
remained silent despite being aware of plaintiff’s conduct
inconsistent with the terms of their contract. Mere knowing
silence generally cannot constitute waiver. Therefore,
2
plaintiff has not submitted clear and convincing evidence that
the parties mutually agreed to modify or waive their contract.
Accordingly, we reverse the judgment of the Court of Appeals
and reinstate the original judgment of the circuit court
granting summary disposition to defendant.
I. Background
Plaintiff and defendant entered into a contract under
which plaintiff was to serve as a sales representative for
defendant. Pursuant to the agreement, plaintiff would earn
commissions on sales made to customers in plaintiff’s
contractually designated sales territory. The contract
negotiated by the parties not only expressly defined
plaintiff’s sales territory, but specifically excluded sales
to “machine tool suppliers.” The contract also included
written modification and anti-waiver clauses.
Despite these provisions, plaintiff solicited sales from
Giddings & Lewis and Ex-Cell-O. It is undisputed that
Giddings & Lewis and Ex-Cell-O are machine tool suppliers and
are therefore customers excluded from plaintiff’s sales
territory under the contract.
Consistent with the unambiguous terms of the contract,
plaintiff was denied commissions on these sales. Plaintiff
sought to negotiate an amendment of the contract to include
payment of commissions for sales to machine tool suppliers.
However, plaintiff and defendant could not reach an agreement
3
to reconfigure plaintiff’s sales territory and grant plaintiff
the right to sell products to machine tool suppliers. As a
result, the parties’ contractual relationship ended.
Plaintiff filed suit seeking payment of commissions for
its sales to Giddings & Lewis and Ex-Cell-O, alleging breach
of “oral contract, implied/express contract/modification,
quantum meruit, unjust enrichment.” Defendant moved for
summary disposition on the basis of the provisions of the
written contract.
The circuit court granted summary disposition to
defendant, stating in pertinent part:
For purposes of this motion the court must
look at the facts in a light most favorable to
plaintiff. Therefore, the court will accept as
true that defendant knew about plaintiff’s efforts
to procure sales with the machine tool suppliers
and that defendant never objected to plaintiff’s
efforts.
Plaintiff seeks quantum meruit relief,
alleging that defendant impliedly consented to
modify the written agreement and/or waived the
requirement that modifications be in writing by
failing to object to plaintiff’s actions or notify
plaintiff that there would be no commission.
Plaintiff relies on the case of Klas v Pearce
Hardware & Furniture Co, 202 Mich 334, 339-340
(1918), where the court held that defendant
impliedly waived the requirement that a
modification be in writing when he was benefitted
by plaintiff’s services and was aware of and
authorized changes or deviations to the written
contract.
The facts of the case at bar are
distinguishable from the facts in Klas. When asked
to put the request for extra work in writing as
required by the written contract, the defendant in
4
Klas replied that “there was no necessity of going
back to the contract on that point, that they were
not children, they were willing to pay for any work
they would order.” Id. at 336.
In the case at bar, there is no evidence that
defendant did anything to encourage or authorize
plaintiff to seek sales outside of the express
territory found in the written contract. Plaintiff
unilaterally attempted to modify the written sales
agreement by soliciting sales from suppliers
outside of the territory expressly defined in the
agreement. Plaintiff alleges that defendant
encouraged them to continue seeking the Giddings &
Lewis and Ex-Cell-O sales, however, plaintiff has
presented no evidence to support this allegation.
While there is evidence that defendant had
knowledge of plaintiff’s efforts, there is no
evidence that defendant encouraged plaintiff or
mutually consented to extend the sales agreement to
machine tool suppliers. The mere fact that
defendant knew of plaintiff’s activities and did
not object to them is not enough to constitute a
waiver of the written modification requirement.
The court finds no question of fact for the jury to
decide.
The Court of Appeals reversed and remanded, holding that,
although there was no evidence in the record that the parties
expressly modified the written agreement, there were genuine
issues of material fact regarding the issues of waiver and
implied contract.1 The Court of Appeals relied on Klas v
Pearce Hardware & Furniture Co, 202 Mich 334; 168 NW 425
(1918), for the proposition that waiver of a written
modification requirement may be implied where conduct, such as
silence in the face of knowledge, misleads a party into
1
Unpublished opinion per curiam, issued March 21, 2000
(Docket No. 207538).
5
reasonably believing that a contractual provision has been
waived.
In lieu of granting leave to appeal, this Court issued
the following order:
[T]hat part of the Court of Appeals March 21,
2000, decision which held that a genuine fact issue
exists regarding whether a contract may be implied
in law is vacated. MCR 7.302(F)(1). Such a
contract cannot be recognized where, as here, the
express contract covers the subject sales by
providing that no commission would be paid for
them. The case is remanded to the Court of Appeals
for reconsideration of the issue whether there
exists a genuine fact dispute regarding whether
defendant’s alleged silence in the face of
plaintiff’s activity relative to the excluded
machine tool suppliers constituted a waiver in
light of the anti-waiver provision in the contract
which purports to prevent modification of the
written agreement. [463 Mich 935 (2000).]
The Court of Appeals again reversed2 the circuit court’s
grant of summary disposition and remanded to the circuit
court, centering its analysis on the written modification
clause. The Court failed to take into consideration the anti
waiver clause, contrary to the directions in our order.3
We granted leave to appeal and directed the parties to
include among the issues to be briefed
2
Unpublished opinion per curiam, issued April 24, 2001
(Docket No. 207538).
3
Despite our explicit reference to the anti-waiver clause
and our direction to the Court of Appeals to construe it, the
panel failed to do so. Instead, the panel acknowledged the
reference to the anti-waiver clause in our remand order, but,
nevertheless, and for reasons unspecified, assumed that this
Court was referring to the written modification clause.
6
whether there exists a genuine dispute of fact
about whether defendant’s alleged silence in the
face of plaintiff’s activity relative to the
excluded machine tool suppliers constituted a
waiver in light of the anti-waiver provision in the
contract, paragraph 11, which purports to prevent
silent modification of the written agreement. . . .
[467 Mich 895-896 (2002).]
II. Standard of Review
We review de novo lower court decisions on a motion for
summary disposition. First Pub Corp v Parfet, 468 Mich 101,
104; 658 NW2d 477 (2003). In reviewing the motion, the
pleadings, affidavits, depositions, admissions, and any other
admissible evidence are viewed in the light most favorable to
the nonmoving party. Radtke v Everett, 442 Mich 368, 374; 501
NW2d 155 (1993). The legal effect of a contractual clause is
a question of law that is reviewed de novo. Bandit
Industries, Inc v Hobbs Int’l, Inc (After Remand), 463 Mich
504, 511; 620 NW2d 531 (2001).
III. Discussion
We granted leave to appeal to consider whether the Court
of Appeals erred in concluding that a genuine issue of
material fact exists concerning plaintiff’s allegation that
defendant silently waived or modified contractual provisions.
Plaintiff argues that defendant waived provisions of the
contract by failing to object to plaintiff’s sales activity in
the face of defendant’s knowledge of that activity.
7
A. Analytic Framework
In order to decide this case, we must consider what
circumstances may support amendment of a contract,
particularly where the contract protects itself against
certain methods of waiver or modification.
At the heart of this inquiry is the freedom to contract.
As this Court recently observed in Wilkie v Auto-Owners Ins
Co, 469 Mich ___, ___; ___ NW2d ___ (2003):
This approach, where judges . . . rewrite the
contract . . . is contrary to the bedrock principle
of American contract law that parties are free to
contract as they see fit, and the courts are to
enforce the agreement as written absent some highly
unusual circumstance such as a contract in
violation of law or public policy. This Court has
recently discussed, and reinforced, its fidelity to
this understanding of contract law in Terrien v
Zwit, 467 Mich 56, 71; 648 NW2d 602 (2002). The
notion, that free men and women may reach
agreements regarding their affairs without
government interference and that courts will
enforce those agreements, is ancient and
irrefutable. It draws strength from common-law
roots and can be seen in our fundamental charter,
the United States Constitution, where government is
forbidden from impairing the contracts of citizens,
art I, § 10, cl 1. Our own state constitutions
over the years of statehood have similarly echoed
this limitation on government power. It is, in
short, an unmistakable and ineradicable part of the
legal fabric of our society. Few have expressed
the force of this venerable axiom better than the
late Professor Arthur Corbin, of Yale Law School,
who wrote on this topic in his definitive study of
contract law, Corbin on Contracts, as follows:
“One does not have ‘liberty of contract’
unless organized society both forbears and
enforces, forbears to penalize him for making his
8
bargain and enforces it for him after it is made.”
[15 Corbin, Contracts (Interim ed), ch 79, § 1376,
p 17.]
While the freedom to contract principle is served by
requiring courts to enforce unambiguous contracts according to
their terms, the freedom to contract also permits parties to
enter into new contracts or modify their existing agreements.
Thus, as in the present case, we are required to resolve the
tension between the freedom to enter into a contract
concerning the same subject matter as a previous contract and
provisions in the previous contract restricting the manner in
which original contractual terms may be modified or waived.
Justice CAMPBELL wrote on this issue over a century ago
when he stated:
[T]he case seems to settle down to the simple
question whether a person who has agreed that he
will only contract by writing in a certain way,
precludes himself from making a parol bargain to
change it. The answer is manifest. A written
bargain is of no higher legal degree than a parol
one. Either may vary or discharge the other, and
there can be no more force in an agreement in
writing not to agree by parol, than in a parol
agreement not to agree in writing. Every such
agreement is ended by the new one which contradicts
it. [Westchester Fire Ins Co v Earl, 33 Mich 143,
153 (1876).]
Echoing Justice CAMPBELL was this Court’s similar
conclusion in Reid v Bradstreet Co, 256 Mich 282, 286; 239 NW
509 (1931):
It is well established that a written contract
may be varied by a subsequent parol agreement
unless forbidden by the statute of frauds; and that
9
this rule obtains though the parties to the
original contract stipulate therein that it is not
to be changed except by agreement in writing.
In discussing the subject of varying written
instruments by parol, Prof. Williston says:
"Nor does it make any difference that the
original written contract provided that it should
not subsequently be varied except by writing. This
stipulation itself may be rescinded by parol and
any oral variation of the writing which may be
agreed upon and which is supported by sufficient
consideration is by necessary implication a
rescission to that extent." Williston, Contracts, §
1828.
The theory of the rule is that:
“Whenever two men contract, no limitation
self-imposed can destroy their power to contract
again.” [Citation omitted.]
Moreover, the next year, in Banwell v Risdon, 258 Mich
274, 278-279; 241 NW 796 (1932), we held that contracting
parties are at liberty to design their own guidelines for
modification or waiver of the rights and duties established by
the contract, but even despite such provisions, a modification
or waiver can be established by clear and convincing evidence
that the parties mutually agreed to a modification or waiver
of the contract.
Accordingly, it is well established in our law that
contracts with written modification or anti-waiver clauses can
be modified or waived notwithstanding their restrictive
amendment clauses. This is because the parties possess, and
never cease to possess, the freedom to contract even after the
10
original contract has been executed.
However, the freedom to contract does not authorize a
party to unilaterally alter an existing bilateral agreement.
Rather, a party alleging waiver or modification must establish
a mutual intention of the parties to waive or modify the
original contract. Banwell, supra. This principle follows
from the contract formation requirement that is elementary to
the exercise of one’s freedom to contract: mutual assent.
Where mutual assent does not exist, a contract does not
exist. Accordingly, where there is no mutual agreement to
enter into a new contract modifying a previous contract, there
is no new contract and, thus, no modification. Simply put,
one cannot unilaterally modify a contract because by
definition, a unilateral modification lacks mutuality.4
The mutuality requirement is satisfied where a
modification is established through clear and convincing
evidence of a written agreement, oral agreement, or
affirmative conduct establishing mutual agreement to waive the
terms of the original contract. In meeting this clear and
convincing burden, a party advancing amendment must establish
4
We note that the understanding that an express bilateral
agreement is not susceptible to unilateral modification is
consistent with our remand order in this very case, where we
held that an implied-in-law contract cannot contradict an
express contract on the same subject. See also, e.g., Scholz
v Montgomery Ward & Co, Inc, 437 Mich 83, 93; 468 NW2d 845
(1991); In re De Haan’s Estate, 169 Mich 146, 149; 134 NW 983
(1912).
11
that the parties mutually intended to modify the particular
original contract, including its restrictive amendment clauses
such as written modification or anti-waiver clauses.
Upon proof of an express oral or written agreement, the
mutuality requirement is clearly satisfied. This is because
where the parties expressly modify their previous contract,
rescission of the terms of the prior agreement is a necessary
implication. Reid, supra. By the clear expression of the
parties, contradictory provisions in the prior agreement are
waived.
However, in situations where a party relies on a course
of conduct to establish modification, mutual assent is less
clear and thus the rescission, or waiver, of the original
contract’s terms is not so evident.5 As a result, where
course of conduct is the alleged basis for modification, a
waiver analysis is necessary.
As we have stated in other contexts, a waiver is a
voluntary and intentional abandonment of a known right.
Roberts v Mecosta Co Hosp, 466 Mich 57, 64 n 4; 642 NW2d 663
(2002); People v Carines, 460 Mich 750, 762 n 7; 597 NW2d 130
(1999). This waiver principle is analytically relevant to a
case in which a course of conduct is asserted as a basis for
5
This potential ambiguity is, in part, why parties to a
contract often include written modification and anti-waiver
provisions; that is, to protect against unintended and
unilateral modification or waiver.
12
amendment of an existing contract because it supports the
mutuality requirement. Stated otherwise, when a course of
conduct establishes by clear and convincing evidence that a
contracting party, relying on the terms of the prior contract,
knowingly waived enforcement of those terms, the requirement
of mutual agreement has been satisfied.
Further, whereas an original contract’s written
modification or anti-waiver clauses do not serve as barriers
to subsequent modification by express mutual agreement, the
significance of such clauses regarding the parties’ intent to
amend is heightened where a party relies on a course of
conduct to establish modification. This is because such
restrictive amendment clauses are an express mutual statement
regarding the parties’ expectations regarding amendments.
Accordingly, in assessing the intent of the parties where
the intent to modify is not express, such restrictive
amendment provisions are not necessarily dispositive, but are
highly relevant in assessing a claim of amendment by course of
conduct. Any clear and convincing evidence of conduct must
overcome not only the substantive portions of the previous
contract allegedly amended, but also the parties’ express
statements regarding their own ground rules for modification
or waiver as reflected in any restrictive amendment clauses.
B. Application
With this analytical framework in hand, we now turn to
13
the present case.
We begin by determining whether the parties’ written
contract contemplates the factual circumstances alleged by
plaintiff. In interpreting a contract, our obligation is to
determine the intent of the contracting parties. Sobczak v
Kotwicki, 347 Mich 242, 249; 79 NW2d 471 (1956). If the
language of the contract is unambiguous, we construe and
enforce the contract as written. Farm Bureau Mut Ins Co of
Michigan v Nikkel, 460 Mich 558, 570; 596 NW2d 915 (1999).
Thus, an unambiguous contractual provision is reflective of
the parties’ intent as a matter of law. Once discerned, the
intent of the parties will be enforced unless it is contrary
to public policy. Id.
First, it is unambiguous in the contract at issue that
plaintiff could not receive commissions for the disputed
sales. Plaintiff’s sales territory under the contract
excludes “all House Accounts and: All [t]ransmission plants
and other machine tool suppliers (turn key operations),” and
plaintiff has conceded that Giddings & Lewis and Ex-Cell-O are
excluded machine tool suppliers as contemplated by the
contract.
Second, the contract includes a written modification
clause, located at ¶ 13(b), which provides:
This Agreement may not be modified in any way
without the written consent of the parties.
14
Plaintiff has not submitted any evidence that the parties
agreed in writing to modify or waive any provisions of the
contract. The facts alleged clearly fall within the ambit of
the written modification clause.
Finally, included as ¶ 11 of the contract is the
following anti-waiver provision:
No delay, omission or failure of [defendant]
to exercise any right or power under this Agreement
or to insist upon strict compliance by
Representative of any obligation hereunder, and no
custom or practice of the parties at variance with
the terms and provisions hereof shall constitute a
waiver of [defendant’s] rights to demand exact
compliance with the terms hereof; nor shall the
same affect or impair the rights of [defendant]
with respect to any subsequent default of the
Representative of the same or different nature.
[Emphasis added.]
Viewing the facts most favorably to plaintiff, we must
assume that defendant (1) knew that plaintiff was actively
soliciting the business of Giddings & Lewis and Ex-Cell-O on
behalf of defendant, (2) knew that plaintiff expected
commissions on any resulting sales, and (3) failed to object
to plaintiff’s solicitation of the excluded customers until
after sales were completed. Accordingly, plaintiff’s proofs
establish, at best, knowledge and silence on defendant’s part
of plaintiff’s effort to enlarge plaintiff’s rights under the
contract. However, defendant’s knowing silence clearly falls
within the excluded activity covered by the “delay, omission
or failure” language of ¶ 11.
15
For these reasons, the parties’ written contract
contemplates the circumstances alleged by plaintiff.
Nevertheless, although the parties negotiated and
consented to contractual terms that fully and precisely
contemplate the factual circumstances alleged by plaintiff and
explicitly provide the legal effect of those alleged
circumstances, plaintiff asks this Court not to enforce those
terms. Viewing the alleged facts in a light most favorable to
plaintiff, we decline to accommodate plaintiff’s request to
not enforce the contract.
Following the analytical framework set forth above,
plaintiff must present clear and convincing evidence of
conduct that overcomes not only the substantive portions of
the previous contract allegedly amended, but also the parties’
express statements regarding their own ground rules for
modification or waiver as reflected in restrictive amendment
clauses. Accordingly, plaintiff must establish clear and
convincing evidence of a mutual agreement to waive the sales
territory and sales-commissions limitations as well as the
written modification and anti-waiver clauses.
Plaintiff’s proofs rest on the mere fact that defendant
knew about plaintiff’s activity inconsistent with the contract
and remained silent. Plaintiff has submitted no evidence of
representations or affirmative conduct by defendant that it
was intentionally and voluntarily relinquishing its right to
16
confine the parties’ relationship to the terms of the contract
and thus demand strict adherence to the sales-commissions and
sales-territory provisions in the contract. Plaintiff has
forwarded no evidence that defendant affirmatively accepted
plaintiff’s sales activity that was inconsistent with the
contract as a modification of the contract.
Defendant’s mere silence, regardless whether defendant
possessed knowledge of plaintiff’s sales activity outside the
contract, does not here amount to an intentional
relinquishment of the sales-territory and sales-commissions
limitations in the contract or the contract’s restrictive
amendment clauses, ¶ 13(b) and ¶ 11. Accordingly, plaintiff
has failed to establish waiver of the original contract by any
evidence, much less clear and convincing evidence.
Plaintiff advances Klas as supportive of its position
that knowing silence is sufficient to establish a waiver of a
contractual provision. The Court of Appeals agreed with this
suggestion.
However, as the circuit court concluded, Klas is clearly
distinguishable. It was the defendant’s agent’s affirmative
expressions of assent, not a course of mere knowing silence,
that amounted to a waiver in Klas. When the Klas plaintiff
informed the defendant that permission to do extra work was
required to be in writing, the defendant’s agent orally
responded that “there was no necessity of going back to the
17
contract on that point, that they were not children, they were
willing to pay for any work they would order . . . .” Id. at
336. This is an affirmative representation that the
contractual provisions were being waived.6 Thus, in Klas, the
defendant’s affirmative expression was sufficient to establish
a waiver.
Nevertheless, the Klas Court proceeded to expound on
“implied waivers.” Because the Klas defendant orally
expressed its consent to waive the requirement for written
approval of extra work, no discussion of implied waivers was
necessary to the resolution of the case. Accordingly, the
Klas Court’s exposition on implied waivers not only mislabels
the defendant’s express representations as implied conduct, it
is obiter dictum.
This is not to say that waiver requires an oral or
written expression of amendment. It is well settled that a
course of affirmative conduct, particularly coupled with oral
or written representations, can amount to waiver. Minkus v
Sarge, 348 Mich 415, 421-422; 83 NW2d 310 (1957) (holding that
an oral request and statement that the request was an “extra”
6
Further, Mr. Ransom Pearce, the individual who had
actual authority to contract for defendant in Klas, testified,
“I ordered Mr. Klas to do the extra work.” Klas, supra at
338. Defendant’s agent, Mr. Chester Pearce, also testified,
“Whenever a change was made either at the suggestion of [the
plaintiff] or at my suggestion, I talked it over with [Mr.
Ransom Pearce] and we agreed to make the change, or not make
it as the case may be.” Id. at 339.
18
to the contract, coupled with the fact that the disputed
matters were “matters of frequent conversation” between the
plaintiff and the defendant, was inconsistent with a claim
that there was no waiver). However, we note that waiver and
forfeiture are related, but distinct concepts. Roberts,
supra. While waiver requires an intentional and voluntary
relinquishment of a known right, a forfeiture is the failure
to assert a right in a timely fashion. Id. at 69. In the
present case, plaintiff’s alleged facts amount only to
forfeiture, which is insufficient to establish clear and
convincing evidence of a mutual assent to modify or waive an
express contract as a matter of law.
Conclusion
Simply put, the parties agreed to the terms of their
written contract. Nevertheless, plaintiff seeks to be
rewarded for proceeding in direct contradiction to the
contract and in the face of the contract’s written
modification and anti-waiver provisions on no basis other than
that defendant was aware of plaintiff’s activities. There is
no evidence that defendant affirmatively accepted plaintiff’s
activities as a modification of the original contract.
In order to find for plaintiff on the facts presented,
this Court must refuse to give effect to the express agreement
of the parties without clear and convincing evidence of
subsequent bilateral consent to alter the existing bilateral
19
agreement. In other words, this Court would have to allow
plaintiff to unilaterally modify a bilateral agreement and, in
addition, do so in the face of contractual terms that
precisely prohibit unilateral modification on the basis of no
more than the defendant’s knowing silence. Our obligation to
respect and enforce the parties’ unambiguous contract absent
mutual assent to modify that contract precludes us from doing
so.
Accordingly, we hold that the circuit court correctly
granted summary disposition for defendant because the parties’
contract was not modified by waiver as a result of defendant’s
silence in the face of knowledge of plaintiff’s solicitation
activities. The judgment of the Court of Appeals is reversed.
Robert P. Young, Jr.
Maura D. Corrigan
Clifford W. Taylor
Stephen J. Markman
20
S T A T E O F M I C H I G A N
SUPREME COURT
QUALITY PRODUCTS AND
CONCEPTS COMPANY,
Plaintiff-Appellee,
v No. 119219
NAGEL PRECISION, INC,
Defendant-Appellant.
___________________________________
KELLY, J. (concurring in part and dissenting in part).
We granted leave to appeal to consider whether a course
of conduct, if proven, could constitute a waiver of the
written modification and antiwaiver clauses contained in the
parties' contract. I concur with the majority's holding that
contractual terms may be waived, including written
modification and antiwaiver clauses. I concur also with the
majority's holding that contractual waiver may be shown by a
course of conduct that constitutes clear and convincing
evidence.
I write in dissent because I believe that a contracting
party should be permitted to show waiver of written
modification and antiwaiver clauses through a course of
conduct constituting estoppel. The proofs would have to
demonstrate that one party misled the other into the
reasonable belief that he had waived certain conditions of
their contract. In addition it would have to be shown that
the other party reasonably relied on the misleading behavior.
As applied to this case, I would find that a question of fact
exists whether defendant led plaintiff to believe that it had
waived the portions of the parties' contract that (1)
prevented plaintiff from recovering commissions for certain
accounts, (2) required a written modification of contract
changes, and (3) required any waiver to be in writing. A
question of fact exists also concerning whether plaintiff
relied on the alleged behavior. Accordingly, I would affirm
the decision of the Court of Appeals that set aside the
summary disposition for defendant.
I. DEMONSTRATING WAIVER
Both our case law and modern legal treatises recognize
that parties may waive contract clauses by a course of conduct
constituting estoppel. Both contemplate that a course of
conduct may consist of silence plus knowledge by one party and
detrimental reliance by the other over time.
Our Court first considered the proofs necessary to
2
establish a contractual waiver in Klas v Pearce Hardware &
Furniture Co, 202 Mich 334; 168 NW 425 (1918). We formulated
the plaintiff's burden by quoting the following among several
sources as authority:
"Waiver is a matter of fact to be shown by the
evidence. It may be shown by express declarations,
or by acts and declarations manifesting an intent
and purpose not to claim the supposed advantage; or
it may be shown by a course of acts and conduct,
and in some cases will be implied therefrom. It
may also be shown by so neglecting and failing to
act as to induce a belief that there is an
intention or purpose to waive. Proof of express
words is not necessary, but the waiver may be shown
by circumstances or by a course of acts and conduct
which amounts to an estoppel." 40 Cyc. p. 267.
[Klas, supra at 339 (emphasis added).1]
Modern legal treatises reflect Klas's view that silence
with knowledge can form the basis of a contractual waiver by
estoppel. American Jurisprudence 2d provides:
1
The majority characterizes as obiter dictum the Klas
Court's inclusion of a course of conduct in the law of
contractual waiver. Ante at 20. I believe this an incorrect
reading of the opinion. The plaintiff in Klas alleged waiver
consisting of (1) certain oral representations by those
working for the defendant, and (2) the defendant's course of
conduct. The Court held that waiver may be shown either
expressly or impliedly, without articulating which formed the
basis of its decision. Because we do not know on which basis
the Klas Court made its decision, the statements or the course
of conduct, we should not discard one holding in favor of the
other. The Klas Court apparently chose not to rank one over
the other, in the belief that, given the facts of the case, a
jury might find either or both. Thus, Klas's discussion of
implied waiver is not dictum. At any rate, it is not
essential for my analysis that Klas have precedential value.
Rather, I cite it for the fact that this Court has recognized
the validity of the test that I apply in this case.
3
[C]ontract provisions may be waived expressly
or the waiver may be implied from the acts of the
parties. . . . [O]ften [waiver] is sought to be
proved by various species of acts and conduct
permitting different inferences and not directly,
unmistakably, or unequivocally establishing it, in
which case it is a question for the jury. An
implied waiver exists when there is either an
unexpressed intention to waive, which may be
clearly inferred from the circumstances, or no such
intention in fact to waive, but conduct which
misleads one of the parties into a reasonable
belief that a provision of the contract has been
waived. [17A Am Jur 2d, Manner of waiver, in
general, § 656, 663 (1991).]
Williston provides:
[S]ilence or inaction which is coupled with
knowledge by the party charged with waiver that the
contract’s terms have [not] been strictly met, and
detrimental reliance by the other, for such a
length of time as to manifest an intention to
relinquish the known right, may result in a waiver
of rights under the contract. [13 Williston,
Contracts, Silence, Inaction or Forbearance, §
39.35, p 653-654 (2000).]
This Court should retain the waiver burden set forth in
Klas and in modern legal treatises. The inquiry into whether
a written contract provision has been waived should be
directed to the parties' words and behavior that are alleged
to demonstrate a revised agreement. Accordingly, I would
allow a court to find waiver on the basis of knowing silence,
in accordance with the standard set forth in American
Jurisprudence 2d:
An implied waiver exists when there is either
an unexpressed intention to waive, which may be
clearly inferred from the circumstances, or no such
intention in fact to waive, but conduct which
4
misleads one of the parties into a reasonable
belief that a provision of the contract has been
waived. [17A Am Jur 2d, Manner of waiver, in
general, § 656, p 663 (1991) (emphasis added).]
II . THE MAJORITY 'S "HEIGHTENED " EVIDENTIARY REQUIREMENT
The majority requires that the party charged with showing
waiver of a written modification or antiwaiver clause meet a
"heightened" standard of proof. Ante at 14-15. This is a new
notion in the law, concocted out of whole cloth. Not only is
it lacking in supporting precedent, it unnecessarily injects
confusion into established law.
What compels addition of this heightened standard of
proof? Logically, if the parties had decided to amend their
agreement, they intended to waive any provisions preventing
them from doing so. There should be no need for an additional
showing of waiver merely because the contract contains a
written modification or antiwaiver clause. Moreover, the
existing standard, clear and convincing evidence, already sets
a high hurdle for the burdened party.
It appears that the purpose of the "heightened" standard
is to enhance the gatekeeping function of the judge,
diminishing the role of the jury. Its addition renders more
difficult the burden of a party arguing waiver of a written
modification or antiwaiver clause to survive summary
disposition and reach a jury. The effect is to signal a
distrust of any jury's willingness or ability to apply the
5
established standard faithfully.
III . THE DEMONSTRATION OF WAIVER IN THIS CASE
In this case, I would find that a question of fact exists
about whether a waiver occurred.2 Because we are reviewing a
summary disposition ruling, we judge the evidence in the light
most favorable to the nonmoving party, plaintiff. Maiden v
Rozwood, 461 Mich 109; 597 NW2d 817 (1999). Plaintiff alleges
that it repeatedly reported to Rolf Bochsler, defendant's
vice-president and chief operating officer, that it was
soliciting business for defendant from companies that were
excluded from its territory. Defendant knew of plaintiff's
efforts, was in a position to benefit financially from them,
and repeatedly said nothing to deter plaintiff's efforts.
Moreover, defendant accepted without hesitation the money from
the sales negotiated by plaintiff to businesses excluded from
its territory.
While one instance of mere silence fails to evince the
"course of acts and conduct" envisioned in Klas, this case
involves more than a single instance of mere silence,
defendant's arguments notwithstanding. Plaintiff alleges that
it repeatedly informed defendant that it was pursuing
2
I dispute the majority's derogatory characterization of
plaintiff as a party that seeks to have the Court "not enforce
the contract." Ante at 18. Rather, plaintiff requests that
the Court examine the contract and find that defendant waived
certain portions of it.
6
extracontractual accounts prohibited by the parties' contract.
Not only did defendant know of plaintiff's activities, it knew
that they would inure to its financial benefit. Defendant
said nothing. Plaintiff relied on defendant's repeated
instances of silence and concluded the sales in question.
Defendant took the proceeds, but refused to pay plaintiff its
commissions. This course of conduct, if proven, could satisfy
the standard described in 17A Am Jur 2d, causing the contract
language that prevented plaintiff from recovering the sales
commissions to be treated as waived. Accordingly, I would
hold that defendant's alleged behavior created a fact question
regarding waiver.
IV . CONSTRUCTION OF THE ANTIWAIVER CLAUSE
I disagree also with the majority's assumption that the
antiwaiver clause applies in this case. Under the parties'
antiwaiver clause, defendant was entitled to "exact
compliance" by plaintiff with the terms of the written
agreement, even if it failed consistently to "insist upon
strict compliance" by plaintiff.3 Plaintiff asserts that it
3
The antiwaiver clause states:
No delay, omission or failure of [defendant]
to exercise any right or power under this Agreement
or to insist upon strict compliance by
Representative of any obligation hereunder, and no
custom or practice of the parties at variance with
the terms and provisions hereof shall constitute a
(continued...)
7
could show that defendant failed to insist on strict
compliance by plaintiff; it allowed plaintiff to solicit
accounts not available to it under the contract. Defendant
infers that, even if plaintiff's allegation is true, defendant
was entitled to "exact compliance" by plaintiff. The
"compliance" would be, apparently, that plaintiff would
refrain from claiming commissions from sales to these
accounts. The majority appears to agree with defendant and
interprets this reasoning as an obvious application of the
contract language as written.
I quite disagree. The antiwaiver clause is not
implicated under the facts of this case. Therefore, waiver of
it never becomes an issue. The following hypothetical example
illustrates how, I believe, the clause should be interpreted:
Assume that the same contract exists as in the case before us.
Plaintiff seeks to makes sales to company A, which is an
excluded company under the parties' agreement. Plaintiff
notifies defendant of its activities and defendant is silent.
Plaintiff relies on defendant's silence and tries, but is
unable, to make the sale. Then, plaintiff seeks to make sales
3
(...continued)
waiver of [defendant's] rights to demand exact
compliance with the terms hereof; nor shall the
same affect or impair the rights of [defendant]
with respect to any subsequent default of the
Representative of the same or different nature.
8
to company B, another company excluded from plaintiff's
territory. This time defendant objects, reminding plaintiff
that company B is an excluded account for which plaintiff is
not entitled to commissions. Plaintiff makes the sale and
claims the commission.
Defendant is entitled to refuse to pay, even though it
received the proceeds of the sale. It was entitled to "strict
compliance" by plaintiff regarding company B, even though it
had failed to "insist upon strict compliance" by plaintiff
regarding company A. Its prior “practice . . . at variance
with the [contract's] terms . . . [did not] constitute a
waiver of [defendant's] right to demand exact compliance with
the terms of [of the contract.]" See n 3.
However, if plaintiff had made the sale to company A ,
defendant could not have successfully relied on the antiwavier
clause. When plaintiff attempted to sell to company A ,
defendant had no "prior practice" of waiving the no-sales-to
excluded-accounts contract provision. Moreover, when
contracting, plaintiff surely did not agree that defendant
could waive plaintiff's compliance with one provision, then
insist on plaintiff's compliance with another if plaintiff,
thereby, worked without commission. To read the language as
the majority does would mean that the parties contracted that
one could cheat the other, something to which they surely did
9
not intend to agree.
Therefore, properly construed, the antiwaiver clause does
not apply to the facts of this case and whether it was waived
is irrelevant.
V. CONCLUSION
I would hold that written modification and antiwaiver
clauses in a contract may be waived by a course of conduct.
This includes conduct that misleads one party into the
reasonable belief that a waiver has occurred and on which the
misled party relies, a form of estoppel. In this case, a
waiver may have taken place. Plaintiff alleges that defendant
exhibited repeated instances of silence when it was notified
that plaintiff was pursuing sales opportunities forbidden by
the contract and plaintiff relied on that conduct as a waiver.
If proven, that could suffice to establish that defendant
waived the parties’ antiwaiver and written modification
contract provisions.
The majority disagrees with this dissent on how
defendant's course of conduct should be judged. The heart of
our disagreement concerns the role of the jury in deciding
contractual waiver cases. The effect of the majority decision
is to authorize and encourage judges to decide close waiver
questions, such as whether a defendant's alleged repeated
instances of knowing silence constitute waiver. I would allow
10
a jury to make this determination. I have faith that juries
can understand and apply the waiver burden correctly, and I
would give them a chance to do so in this case. Accordingly,
I would affirm the decision of the Court of Appeals that set
aside the summary disposition for defendant and remand the
case to the trial court.
Marilyn Kelly
CAVANAGH, J.
I concur in the result only.
Michael F. Cavanagh
11
S T A T E O F M I C H I G A N
SUPREME COURT
QUALITY PRODUCTS AND
CONCEPTS COMPANY,
Plaintiff-Appellee,
v No. 119219
NAGEL PRECISION, INC,
Defendant-Appellant.
___________________________________
WEAVER, J. (concurring in part and dissenting in part).
I concur with the majority and Justice KELLY that
contractual terms may be waived, including written
modification and antiwaiver clauses. I also concur that, in
addition to the fact that contract terms may be waived by the
parties’ written or oral agreement, waiver may be established
by clear and convincing evidence of an intent to waive through
the parties’ course of conduct.
I disagree with the majority’s imposition of a
“heightened” burden on a party who relies on a course of
conduct to modify a contract that includes a written
modification or antiwaiver clause. Ante at 14-15. The
majority’s heightened standard is not necessary, because the
existing law already requires that waiver by a course of
conduct must be established by clear and convincing evidence.
Moreover, the majority has failed to justify why the parties’
mutual consent to contractual terms addressing waiver or
modification methods deserves any greater weight than their
mutual consent to any other term of the contract. As noted by
Justice KELLY , the apparent purpose of this heightened standard
is to make it more difficult to establish that a question of
fact exists regarding the intent to waive contract terms.
I dissent separately also because I would hold that
defendant’s course of conduct, as alleged by plaintiff,
establishes a question of fact regarding whether defendant
intended to waive the contract requirements, including the
written-modification and antiwaiver clauses of the contract at
issue. In light of defendant’s alleged knowledge of
plaintiff’s contractually prohibited sales efforts,
defendant’s silence as those efforts proceeded, as well as
defendant’s acceptance of payment resulting from plaintiff’s
efforts, I would allow a jury to determine whether defendant
intended to waive the terms of the contract at issue.
I
would, therefore, affirm the decision of the Court of Appeals
that set aside the summary disposition for defendant.
Elizabeth A. Weaver
2