A party may believe that a contract is insulated from adverse modification by including specific modification clauses. For example, clauses like “modifications must be agreed to in writing”, and anti-waiver clauses such as “no custom or practice at variance with these terms shall constitute a waiver.” In an important Michigan Supreme Court opinion Quality Prod. & Concepts Co. v. Nagel Precision, Inc. dated July 31, 2003, the Court ruled that parties to a contract are free to mutually waive or modify their contract notwithstanding a written modification or anti-waiver clause. However, this cannot be done by one party unilaterally. Mutuality is still the centerpiece to entering, waiving, or modifying a contract.
Quality Prod. & Concepts Co. v Nagel Precision, Inc.
In this case, the two parties entered into a contract where the plaintiff was to serve as a sales representative for the defendant. The contract set out specific terms detailing for what sales the plaintiff would receive commission. The contract also contained both a modification clause and an anti-waiver clause.
Despite the contract indicating otherwise, the plaintiff solicited sales from companies that he was not entitled to receive commission from. The plaintiff informed the defendant he would continue to complete these sales. Meanwhile the defendant continued to enforce the terms of the contract and not provide plaintiff with commission for the sales.
The plaintiff argued that the defendant’s knowledge of and failure to object to plaintiff’s sales activity waived provisions of the contract. Further, plaintiff argued this modified the contract to allow plaintiff to receive commission. The Court noted that two parties are free to contract. Two parties are free to amend their contracts, and free to contract again in the future however they see fit. But the key to all contracts is the concept of mutuality.
When a modification or anti-waive clause is present, the mutuality requirement is satisfied through clear and convincing evidence of a written or oral agreement, or affirmative conduct establishing the mutual agreement to modify or waive the original contract. In this case, the plaintiff did not provide any such evidence. Mere knowing silence, as the defendant exhibited in this case, cannot constitute waiver.
The Court went on to say that affirmative conduct can constitute a waiver. But in this case, plaintiff’s alleged facts amounted only to forfeiture. And forfeiture is insufficient to establish the clear and convincing evidence needed for mutual assent to modify or waive an express contact.
Key Takeaway
The key takeaway from this case is that parties have freedom to contract throughout the entire contract process. In all aspects of contracting, including modifying or amending a previously agreed upon contract, mutuality must be present. The Court will enforce all provisions of contracts and modifications of contracts as long as they were mutually agreed upon by both parties. However, it is always safest to put any amendments to a contract in writing. That way there is no disagreement about the terms of the contract later.
A full copy of the opinion can be read at:
https://caselaw.findlaw.com/mi-supreme-court/ 1457763.html
