Recent Case Law from the First Circuit

Where clause in contract was waived (written permission to sublet), it cannot later be raised to prevent further performance of the remainder of the contract terms (Exercise Option);

Court discussed doctrines of waiver and modification, noting that although a contract can state no waiver/modification unless in writing, the parties can waive by their actions;

Trivial violations of the contract will not excuse the other party's performance of it:

BACHORZ v. MILLER-FORSLUND, No.12-1187 (1st Cir. December ) Before Justices Howard, Ripple [sitting by designation from the 7^th Circuit] and Selya, Opinion by Ripple). 

DISTRICT COURT AFFIRMED: In plaintiffs’ suit to enforce an option to purchase a leased premises agreement, the District court’s [Mass] grant of summary judgment in favor of the plaintiffs and a judgment ordering specific performance of the purchase option are affirmed where (1) because the uncontradicted evidence shows that the predecessor-in-interest agreed to waive forever the provision requiring the plaintiffs to obtain written permission prior to subleasing the premises, the plaintiffs’ failure to obtain permission was not a breach of the lease agreement and did not prevent the valid exercise of the option to purchase; and (2) there is no evidence suggest the plaintiffs’ alleged violations of municipal ordinances prejudiced defendant or her predecessor, significantly affected her rights under the contract or otherwise went “to the heart of the parties’".

Whether a party has waived a right under a contract is usually a question of fact, but the issue may be resolved on summary judgment when “the evidence is clear, unequivocal and undisputed.” Metro. Transit Auth. v. Ry. Exp. Agency, Inc., 84 N.E.2d 26, 28 (Mass. 1949); see also Fed. R. Civ. P. 56(a) (“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”).  Waiver of a contractual right “may occur by an express and affirmative act, or may be inferred by a party’s conduct, where the conduct is ‘consistent with and indicative of an intent to relinquish voluntarily a particular right [such] that no other reasonable explanation of [the] conduct is possible.’” KACT, Inc. v. Rubin, 819 N.E.2d 610, 616 (Mass. App. Ct. 2004) (alterations in original) (quoting Attorney Gen. v. Indus. Nat’l Bank of R.I., 404 N.E.2d 1215, 1218 n.4 (Mass. 1980)); see also Dynamic Mach. Works, Inc. v. Mach. & Elec. Consultants, Inc., 831 N.E.2d 875, 880 (Mass. 2005) (noting that waiver may be express or “inferred from a party’s conduct and the surrounding circumstances” (internal quotation marks omitted)).  If waiver is to be inferred from a party’s conduct, the conduct at issue must be “clear, decisive and unequivocal.” Glynn v. City of Gloucester, 401 N.E.2d 886, 892 (Mass. App. Ct. 1980); see also Paterson-Leitch Co. v. Mass. Mun. Wholesale Elec. Co., 840 F.2d 985, 992 (1st Cir. 1988). The waiver must be clear, particularly when it involves a condition for exercising an option contained in a lease agreement. Massachusetts law takes a strict view of options. “[A] waiver of the conditions with respect to the tenancy will not be a waiver of the conditions for the option unless the lessor makes a separate waiver of those conditions.” Pear v. Davenport, 853 N.E.2d 206, 209 (Mass. App. Ct. 2006). 

Thus, a landlord who by his conduct waives a provision requiring the timely payment of rent, does not waive necessarily that requirement for purposes of a provision requiring compliance with lease terms as a precondition to the exercise of an option. See id. at 210.   As to a writing requirement, a contractual provision requiring modifications or waivers to be in writing does not prevent the parties from making such changes orally or through their conduct. Indeed, it is well settled Massachusetts law that parties, through their words or conduct, may modify a contract despite a provision requiring modifications to be in writing. See Cambridgeport Sav. Bank v. Boersner, 597 N.E.2d 1017, 1022 (Mass. 1992) (“[A] provision that an agreement may not be amended orally but only by a written instrument does not necessarily bar oral modification of the contract. Mutual agreement on modification of the requirement of a writing may . . . be inferred from the conduct of the parties and from the attendant circumstances of the instant case.” (second alteration in original) (internal quotation marks omitted)); First Pa. Mortg. Trust v. Dorchester Sav. Bank, 481 N.E.2d 1132, 1138-39 (Mass. 1985) (holding that the “clear terms” of the original agreement requiring written consent for modification did not nullify a subsequent oral modification). Parties may waive orally provisions requiring modifications to be in writing. See, e.g., Parks v. Johnson, 703 N.E.2d 728, 728-29 (Mass. App. Ct. 1998) (holding that a party to a construction contract impliedly waived, through words and conduct, a provision requiring changes to be in writing). Parties also may waive orally a provision requiring all waivers to be in writing. See Clifford Shoe Co. v. United Shoe Mach. Corp., 8 N.E.2d 161, 167 (Mass. 1937) (noting that a “clause in the lease requiring waiver of any provisions to be in writing . . . may be modified orally”). See also 13 Samuel Williston & Richard A. Lord, A Treatiseon the Law of Contracts § 39:36 (4th ed. 2000) (“[T]he nonwaiver clause itself, like any other term of the contract, is subject to waiver by agreement or conduct during performance.”); 8 CatherineM.A. McCauliff, Corbin on Contracts § 40.13 (Joseph M. Perillo,ed., revised ed. 1999) (“[A]n express provision in a written contract that no rescission or variation is valid unless it too is in writing will not invalidate a subsequent oral agreement to the contrary.”). 

Applying these principles to the present case, we agree that the record supports the district court’s determination that clear, decisive conduct and statements establish that Miller effectively waived the provision requiring the plaintiffs to obtain written consent before subleasing the premises.  The parties’ words and conduct clearly evince a mutual agreement to waive permanently the provisions related to roof maintenance and subtenants. The only evidence in the record shows that Miller said that he would waive the provision for future subtenants if the plaintiffs accepted responsibility for the roof. The plaintiffs’ decision to replace the roof at their own considerable expense “is consistent with and indicative of,” KACT, 819 N.E.2d at 616, their acceptance of Miller’s proposal. That the waiver applied to the purchase option is also clear from the context of the conversation--Miller wanted to be excused from his responsibility to maintain the roof because he expected the plaintiffs to exercise the option. This “clear, decisive and unequivocal” waiver released the plaintiffs from any obligation to obtain Miller’s prior written permission and failure to obtain permission was not a breach.   

Our decision in Sunoco, Inc. v. Makol, 372 F.3d 31 (1stCir. 2004), is not contrary. Sunoco involved a tenant who breached an assignment clause. According to the record, absent that breach, the clause may have resulted in the lessor receiving a significant portion of the rent paid by the subtenant. Id. at 38-39. Unlike the present case, there was no evidence that the landlord waived the provision, id. at 36, and we were not asked to determine whether the breach was material or insignificant.  The testimony and complaint do not conflict. The evidence shows that the alleged breach of Miller’s obligation to maintain the roof in good condition prompted the plaintiffs to confront Miller, which in turn led to the oral agreement and the plaintiffs’ decision to replace the roof at their own considerable expense. It is not surprising that the plaintiffs did not include all these details in the complaint because a “short and plain statement” is all that the rules require. Fed. R. Civ. P. 8(a).

In addition, the request for reimbursement for replacing the roof is best read as an alternative theory for relief in the event that the court denied specific performance, and is entirely permissible under Rule 8(d). Further, the district court noted that Ms. Miller-Forslund had failed to present evidence of how the alleged code violations harmed her or Miller and held that she was attempting to seize on trivial violations in order to avoid her obligation to sell the property.  See Bachorz, 812 F. Supp. 2d at 94. While Massachusetts takes a strict view of options, Trinity Realty I, LLC v. Chazumba, LLC, 931 N.E.2d 510, 512 (Mass. App. Ct. 2010), it also recognizes that a party’s substantial compliance may be sufficient, as a matter of law, to maintain its right to exercise an option. Id. Thus, “minor,” “immaterial” or “inconsequential” breaches, which do not prejudice the lessor, will not prevent a lessee from exercising an option. Id. Otherwise, an “option would be virtually meaningless, as [the lessor] could seize on any number of trivial, technical violations of the lease in order to avoid it.” Id. at 513.

See also 13 Samuel Williston & Richard A. Lord, A Treatiseon the Law of Contracts § 39:36 (4th ed. 2000) (“[T]he nonwaiverclause itself, like any other term of the contract, is subject to waiver by agreement or conduct during performance.”); 8 CatherineM.A. McCauliff, Corbin on Contracts § 40.13 (Joseph M. Perillo,ed., revised ed. 1999) (“[A]n express provision in a written contract that no rescission or variation is valid unless it too is in writing will not invalidate a subsequent oral agreement to the contrary.”).  Applying these principles to the present case, we agree that the record supports the district court’s determination that clear, decisive conduct and statements establish that Miller effectively waived the provision requiring the plaintiffs to obtain written consent before subleasing the premises.  The parties’ words and conduct clearly evince a mutual agreement to waive permanently the provisions related to roof maintenance and subtenants. The only evidence in the record shows that Miller said that he would waive the provision for future subtenants if the plaintiffs accepted responsibility for the roof. The plaintiffs’ decision to replace the roof at their own considerable expense “is consistent with and indicative of,” KACT, 819 N.E.2d at 616, their acceptance of Miller’s proposal. That the waiver applied to the purchase option is also clear from the context of the conversation--Miller wanted to be excused from his responsibility to maintain the roof because he expected the plaintiffs to exercise the option. This “clear, decisive and unequivocal” waiver released the plaintiffs from any obligation to obtain Miller’s prior written permission and failure to obtain permission was not a breach.   

Our decision in Sunoco, Inc. v. Makol, 372 F.3d 31 (1stCir. 2004), is not contrary. Sunoco involved a tenant who breached an assignment clause. According to the record, absent that breach, the clause may have resulted in the lessor receiving a significant portion of the rent paid by the subtenant. Id. at 38-39. Unlike the present case, there was no evidence that the landlord waived the provision, id. at 36, and we were not asked to determine whether the breach was material or insignificant.  The testimony and complaint do not conflict. The evidence shows that the alleged breach of Miller’s obligation to maintain the roof in good condition prompted the plaintiffs to confront Miller, which in turn led to the oral agreement and the plaintiffs’ decision to replace the roof at their own considerable expense. It is not surprising that the plaintiffs did not include all these details in the complaint because a “short and plain statement” is all that the rules require. Fed. R. Civ. P. 8(a). In addition, the request for reimbursement for replacing the roof is best read as an alternative theory for relief in the event that the court denied specific performance, and is entirely permissible under Rule 8(d). 

Further, the district court noted that Ms. Miller-Forslund had failed to present evidence of how the alleged code violations harmed her or Miller and held that she was attempting to seize on trivial violations in order to avoid her obligation to sell the property.  See Bachorz, 812 F. Supp. 2d at 94. While Massachusetts takes a strict view of options, Trinity Realty I, LLC v. Chazumba, LLC, 931 N.E.2d 510, 512 (Mass. App. Ct. 2010), it also recognizes that a party’s substantial compliance may be sufficient, as a matter of law, to maintain its right to exercise an option. Id. Thus, “minor,” “immaterial” or “inconsequential” breaches, which do not prejudice the lessor, will not prevent a lessee from exercising an option. Id. Otherwise, an “option would be virtually meaningless, as [the lessor] could seize on any number of trivial, technical violations of the lease in order to avoid it.” Id. at 513.