Wheeler v. Wheeler

• Decision Date: 01 April 1980
• Docket Number: No. 82,82
• Citation: 299 N.C. 633,263 S.E.2d 763
• Parties: Mary Lou WHEELER v. Raymond W. WHEELER.
• Court: North Carolina Supreme Court

Page 763

263 S.E.2d 763

299 N.C. 633

Mary Lou WHEELER v. Raymond W. WHEELER.

No. 82.

Supreme Court of North Carolina.

April 1, 1980.

Charles T. Myers, Myers, Ray & Myers, Charlotte, for plaintiff-appellant.

Ernest S. Delaney, Jr., Delaney, Millette, DeArmon & McKnight, Charlotte, for defendant-appellee.

CARLTON, Justice.

I.

At issue in this case is the sufficiency of the jury charge on waiver where the evidence indicated that defendant continued performing his contractual duties and continued accepting plaintiff's partial performance of her contractual duties for some eleven years after plaintiff's breach. We find that the jury charge was sufficient on the issue of waiver and reverse the Court of Appeals.

The judge charged the jury in pertinent part:

(D)id the defendant waive the express terms of the contract relating to his visitation rights? . . . Waiver is an intentional surrender of a known right or privilege. This intention may be express or implied from acts or conduct which naturally and justly leads the other party to believe that the right has been intentionally foregone. There can be no waiver unless intended by one party, in that case the defendant, and so understood by the other, in this case the plaintiff; or, unless one party has acted so as to mislead the other. In this case, the plaintiff, Mrs. Wheeler, contends that defendant disagrees, that the defendant waived the exact visitation rights specified in the contract by failing to ask for or exercise those rights after some period in the nineteen sixties and continued to send alimony payments until 1975. The defendant contends he never intended to give up or waive his visitation rights under the contract reached between the parties in 1956. A party who waives certain rights cannot thereafter assert those rights. So Members of the Jury, if you find from the evidence, and by its greater weight, that the defendant intentionally surrendered his visitation rights as granted in the original Separation Agreement between the parties, you will answer Issue No. 2 "Yes", in favor of the plaintiff, Mrs. Wheeler. On the other hand, if you fail to so find by the greater weight of the evidence, you will answer Issue No. 2, "No" in favor of Dr. Wheeler.

The Court of Appeals held that such a charge was inadequate, reasoning that an agreement to alter the terms of a contract is treated as another contract and must be supported either (1) by additional consideration, Lenoir Memorial Hospital, Incorporated v. Stancil, 263 N.C. 630, 139 S.E.2d 901 (1965) or (2) by evidence that one party intentionally induced the other party's detrimental reliance, the doctrine of equitable estoppel, Matthieu v. Piedmont Natural Gas Company, 269 N.C. 212, 152 S.E.2d 336 (1967).

While we agree that an agreement to alter the terms of a contract must be supported by new consideration, Lenoir Hospital v. Stancil, supra ; Restatement of Contracts § 297, Comment c, we note that continued performance or continued acceptance of performance by an innocent party after partial breach of a contract involves another legal principle entirely. Such behavior constitutes a valid waiver of a contractual provision and does not need to be supported by additional consideration or estoppel to effect a binding agreement.

It is well settled in other jurisdictions that after one party has breached a contractual provision, the nonbreaching party has a choice between alternate courses of conduct. He may terminate his further liability and recover damages or he may continue the contract, choosing to receive the promisee's defective performance and regarding his right to damages as adequate compensation. Restatement of Contracts § 309; 4 Corbin, Contracts § 954; Simpson, Contracts § 171; J. Calamari & J. Perillo, Contracts § 11-37. See also, Sitlington v. Fulton, 281 F.2d 552 (10th Cir. 1960); Lichter v. Goss, 232 F.2d 715 (7th Cir. 1956); Graham v. San Antonio Machine & Supply Corporation, 418 S.W.2d 303 (Tex.Civ.App.1967). Where the promisor chooses the second alternative, cases speak of the promisor's waiver by continuing to perform or to receive performance. See, e. g., Brunswick Corporation v. Vineberg, 370 F.2d 605 (5th Cir. 1967); K. & G. Construction Company v. Harris, 223 Md. 305, 164 A.2d 451 (1960); J. Calamari & J. Perillo, supra at § 11-37; Simpson, supra at § 171; 3a Corbin, supra at § 755; 5 Williston, Contracts § 688. Because such a waiver is not a mere promise, but is instead a continuation of performance, sometimes called an election by conduct, it is binding without consideration or estoppel. J. Calamari & J. Perillo, supra § 11-37 at 451; Simpson, supra at § 171; Restatement of Contracts § 309. See, e. g., Brede v. Rosedale Terrace Company, 216 N.Y. 246, 110 N.E. 430 (1915).

While cases in our own jurisdiction do not specifically label the doctrine "waiver by performance" or "waiver by continuing to accept performance," they do make clear that the same legal principles apply. In Towery v. Carolina Dairy, Incorporated, 237 N.C. 544, 75 S.E.2d 534 (1953), plaintiff dairy continued performing under the terms of a requirements contract even after defendant milk distributor had failed to escalate the price it paid for the plaintiff's milk as it was required to do under the terms of the contract. Even without evidence of additional consideration or estoppel, this Court held that such facts were evidence of a valid waiver, stating:

While the breach of a continuing contract may justify a termination of the contract by the innocent party, the mere fact a breach of one of the provisions of the contract has been committed by one party does not necessarily accomplish that result, as the party not in fault may elect to waive the breach and continue performance regardless of the breach. Lowell v. Wheeler's Estate, 95 Vt. 113, 112 A. 361; Dudzik v. Degrenia, 48 R.I. 430, 138 A. 57, 57 A.L.R. 823; Miller v. Mantik, 116 Md. 279, 81 A. 797; Cook & Bernheimer v. Hagedorn, 82 Ind.App. 444, 131 N.E. 788; Thomas-Bonner Co. v. Hooven O. & R. Co., 6 Cir., 284 F. 377.

Where there is a breach of a contract or some provision thereof which does not go to the substance of the whole contract and indicate an intention to repudiate it, the breach may be waived by the innocent party. Non constat such breach, he may elect to treat the contract as still subsisting and continue performance on his part. H. M. Wade Manufacturing Co. v. Lefkowitz, 204 N.C. 449, 168 S.E. 517; Manufacturing Co. v. Building Co., 177 N.C. 103, 97 S.E. 718; Sinclair Refining Co. v. Costin, Tex.Civ.App., 116 S.W.2d 894; 12 A.J. 967-8; 17 C.J.S. Contracts §§ 475, 491, pages 981-2, 992.

Id. at 546, 75 S.E.2d at 535-36.

In Danville Lumber and Manufacturing Company v. Gallivan Building Company, 177 N.C. 103, 97 S.E. 718 (1919), a buyer accepted defective window sashes after he inspected them and knew of the defective condition. This Court there held this acceptance to be a waiver of the buyer's right to excuse his own performance, stating, "Waiver or acquiescence, like election, presupposes that the person to be bound is fully cognizant of his rights, and that being so, he neglects to enforce them." Id. at 107, 97 S.E. at 720. The Danville Manufacturing Court did not require additional consideration or evidence of estoppel to enforce the contract but instead concluded that the foundation of the doctrine was intention which "should be proven and found as a fact and is rarely to be inferred as a matter of law." Id., 97 S.E. at 720.

In Industrial Lithographic Company v. Mills, 222 N.C. 516, 23 S.E.2d 913 (1943), this Court reversed a lower court's order of compulsory reference in an accounting action for damages for breach of an exclusive dealership contract where there was some evidence that the plaintiff had known that defendant dealer was selling products other than the plaintiff's and had acquiesced to that breach. Again, there was no showing of consideration or estoppel. The Court made clear that the crucial question was whether plaintiff intended to waive the breach, and that this factual determination had to be made prior to any compulsory reference.

More recently, in Fairchild Realty Company v. Spiegel Incorporated, 246 N.C. 458, 98 S.E.2d 871 (1957), this Court held that where a landlord received rent after full knowledge of tenant's breach of a lease condition, the landlord's behavior constituted a waiver of its contractual right to terminate the lease. The reasoning of the Court was that where a party accepted continuing benefits under the contract, will full knowledge of a prior breach, he waived his right to declare the contract terminated for the prior breach.

From these cases it is clear that in this jurisdiction, a party may waive the breach of a contractual provision or condition without consideration or estoppel if

(1) The waiving party is the innocent, or non-breaching party, and

(2) The breach does not involve total repudiation of the contract so that the nonbreaching party continues to receive some of the bargained-for consideration. Generally this means either that the contract involved is a continuing one, such as the requirements contract in Towery v. Carolina Dairy, supra, or the exclusive dealership contract in Industrial Lithographic v. Mills, supra, or it means that the breach of the contractual provision did not go to the totality of the contract as the defective delivery in Danville Manufacturing v. Gallivan was not a total failure of consideration, and

(3) The innocent party is aware of the breach, and

(4) The innocent party intentionally waives his right to excuse or repudiate his own performance by continuing to perform or accept the partial performance of the breaching party.

It seems to make little difference in the case law whether the breach of the contract provision was allegedly material or not. The mere fact that the nonbreaching party elects to continue performance or...