Waiver of the Non-Waiver Clause
By Bradley D. Blakeley, Esq
As a vendor, you enter into a distribution agreement
with a customer. The agreement contains a clause that any modification
to the agreement must be in writing. Is it possible for you to waive,
without a writing, the non-waiver clause? Under the recent case of
Wireless Distributors, Inc. v. Sprintcom, Inc., it may well be.
In Wireless Distributors, ABC Wireless entered
into a telephone distribution agreement with Sprintcom, Inc., d/b/a
Sprint PCS. The distribution agreement provided that any modification
or waiver must be in writing and signed by both parties. Pursuant
to the agreement, ABC Wireless agreed not to use independent contractors,
franchises, dealers or other distributors to sell the products. However,
Sprint PCS continued doing business with ABC Wireless with the knowledge
that ABC Wireless sold the products to its dealers and subdealers
not listed in the distribution agreement and that this was the predominate
way in which ABC Wireless conducted its business.
Thereafter, ABC Wireless assigned its rights under
the distribution agreement to Wireless Distributors. Prior to the
assignment, Wireless Distributorsís president met with Sprint PCSís
account representative and informed that Wireless Distributors did
not own any retail stores and would be selling the products to dealers
and subdealers nationwide. Based on the conversation and visit, Sprint
PCS knew and understood, prior to the assignment, that Wireless Distributors
would be selling the products to its dealers and their subdealers
nationwide and not directly through any retail stores. Sprint PCS
consented to the assignment and did business with Wireless Distributors
pursuant to the terms of the distribution agreement.
Later in the year, Sprint PCS amended the compensation
structure under the distribution agreement. Wireless Distributors
agreed to the amendment and the compensation addendum and agreed
to continue to do business with Sprint PCS. Issues between the parties
arose over the changes to the compensation structure and Sprint PCS
terminated the distribution agreement in accordance with its terms.
At no time prior to the termination of the distribution agreement
did Sprint PCS claim that Wireless Distributors breached the distribution
agreement by selling the products to its dealers and their subdealers.
Wireless Distributors filed suit against Sprint PCS
alleging breach of contract and fraudulent misrepresentation. The
distribution agreement was governed by Kansas law. Under Kansas law,
when a contract is complete, unambiguous, and free from uncertainty,
any parol evidence of prior or contemporaneous agreements or understandings
tending to vary the terms of the contract evidenced by the writing
is not admissible. Evidence of prior agreements, course of dealing
and course of performance can be used to explain or supplement existing
terms; however, they cannot be used to contradict the terms of a
fully integrated written contract.
Wireless Distributors argued that Sprint PCS waived
any rights it had relating to sale of the products through dealers
or other distributors; thus, the parol-evidence rule is not applicable.
Under Kansas law, a contract or portion of a contract may be modified
or waived. The Kansas Code, which adopts the Uniform Commercial Code,
provides that a signed agreement which excludes modification unless
by a signed writing cannot be otherwise modified. However, if an
attempt at modification is not in writing, it can still operate as
a waiver. Waiver in contract law implies that a party has voluntarily
and intentionally renounced or given up a known right, or has caused
or done some positive act or positive inaction which is inconsistent
with the contractual right.
Wireless Distributors conceded that the distribution
agreement provided that any modification or waiver must be in writing
and signed by both parties, and that the distribution agreement was
not modified or waived in writing by the parties. The court found
that the allegations that Sprint PCS continued doing business with
Wireless Distributors with the knowledge that Wireless Distributors
sold the products to its dealers and subdealers and that this was
the predominate way in which Wireless Distributors conducted its
business supported a finding that Sprint PCS not only waived the
exclusive dealing requirement but also the provisions requiring that
any waiver be in writing.
Reprinted by permission from Trade Vendor Quarterly Blakeley & Blakeley
LLP Fall 04