ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, April 27, 2018

Fun with renewal options, and waivers, and counteroffers!

A recent case out of the District of New Mexico, Bar J Sand & Gravel, Inc. v. Fisher Sand & Gravel Co., No. Civ. 15-228 SCY/KK (behind paywall), offers up a waiver fact pattern. The parties had a contract with a renewal option that stated that written notice of intent to exercise the renewal option had to be received within 120 days of the initial contract expiring. Fisher indisputably provided the written notice after the 120-day deadline. Fisher, no longer wanting to be in a contract with Bar J due to disputes over terms, argued that this meant its written notice was ineffective but Bar J argued that it had waived the 120-day requirement. 

The court agreed. Bar J and Fisher had discussions about the written notice and Bar J indicated to Fisher multiple times that it should send the written notice over even though it was 'technically" late. If Bar J had intended to enforce the 120-day requirement, it would not have asked Fisher to prepare and submit the late notice. Therefore, this operated as a waiver of the 120-day requirement, which Bar J was permitted to do.

However, the court found that the written notice Fisher sent was not in fact an exercise of the renewal option but rather, based on its language, some sort of counteroffer in which Fisher was requesting to renegotiate some terms. The parties did in fact discuss modification of their contractual terms and never reached an agreement on them (hence Fisher's stance in this case). Therefore, the court did not find that Fisher could be held to have renewed the agreement.

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