Reliance waivers: Overview, definition, and example
What are reliance waivers?
Reliance waivers are clauses in contracts where one party agrees to waive or limit their ability to rely on certain statements, representations, or promises made by the other party. Essentially, a reliance waiver means that the party agreeing to it cannot claim they were misled or deceived by certain representations once the contract is executed. These waivers are often included to prevent future disputes over statements or promises made during negotiations that might not be part of the final written agreement.
In practice, reliance waivers are typically used to prevent claims that the other party made false representations, including verbal promises or side agreements, that weren’t included in the final written contract. This helps ensure that the written contract is the final, complete, and exclusive understanding of the terms between the parties.
Why are reliance waivers important?
Reliance waivers are important because they provide clarity and protection to the parties involved by establishing that the written contract supersedes any prior verbal discussions or informal representations. By including a reliance waiver, businesses can avoid future legal claims based on statements that were made but were not formalized in the contract. This ensures that both parties are fully committed to the terms outlined in the agreement and reduces the risk of misunderstandings or fraudulent claims.
For SMB owners, using reliance waivers in contracts helps minimize the potential for disputes regarding promises or claims that were not part of the final agreement, making it easier to enforce the terms of the contract and protecting the business from unexpected legal challenges.
Understanding reliance waivers through an example
Imagine you run a consulting business, and you are entering into a contract with a client. During initial discussions, the client verbally promises that they will provide you with additional resources to complete the project. However, this promise is not included in the written contract.
To avoid potential future disputes where the client might argue that they relied on that verbal promise, you include a reliance waiver in the contract. The waiver clarifies that the client cannot later claim they relied on the verbal promise to their detriment, as the written contract is the full and final agreement between both parties.
In another example, you are negotiating with a vendor for a supply contract. During negotiations, the vendor makes a statement about the quality of their product, but that statement is not included in the formal contract. To protect your business from potential legal action if the product quality does not meet expectations, you include a reliance waiver in the contract to state that you are not relying on any representations made outside the written agreement.
Example of a reliance waiver clause
Here’s an example of what a reliance waiver clause might look like in a contract:
“The Parties agree that this Agreement constitutes the entire and complete understanding between them with respect to the subject matter hereof. Any prior statements, representations, or promises, whether written or oral, that were not specifically included in this Agreement are not relied upon by either Party and shall not be deemed binding. Each Party expressly waives any claims based on reliance on such prior representations or promises.”
Conclusion
Reliance waivers help clarify that the written contract is the exclusive and final agreement between the parties, protecting businesses from claims related to prior statements or promises not included in the contract. For SMB owners, including a reliance waiver in contracts ensures that both parties are on the same page and that disputes related to verbal agreements or informal promises can be avoided. By reducing the risk of future legal issues, reliance waivers help create more predictable and enforceable business relationships.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.