Contracts and Sales Multistate Bar Practice Exam

What happens if one party detrimentally relies on a waiver?

1. The waiver can be rescinded anytime

2. The other party can enforce the original terms

3. The waiving party is estopped from rescinding

4. The contract becomes void

The correct answer is: The waiving party is estopped from rescinding

When one party detrimentally relies on a waiver, the waiving party may be estopped from rescinding the waiver. This principle arises from the doctrine of promissory estoppel, which protects a party who relies on the assurance provided by another party when the reliant party has taken actions based on that assurance. In this context, if a party waives a right and the other party takes significant action based on that waiver, the waiving party cannot just retract their waiver without potentially causing an unfair detriment to the relying party. As a result, if the party who benefited from the waiver has acted to their detriment, this can create an equitable estoppel situation, meaning that the waiving party is prevented from reverting to the original position and enforcing the original terms of the agreement unless certain conditions are met. The reliance must be reasonable and substantial, which is fundamental to the application of estoppel in this scenario. This principle ensures fairness and upholds the reliability of parties’ promises or waivers in contractual dealings. Therefore, the answer reflects the legal maxim that one cannot benefit from their own actions if such actions have led to a detrimental position for another party.