Unconscionability, Waiver, Limitation Of Liability: Part II

Q– What can be done if my contract is unconscionable?

If a portion of the contract, or the entire contract, is found to be unconscionable, the court has several choices:

  1. Refuse to enforce the entire contract
  2. Sever out the unconscionable portion from the contract
  3. Limit the application of the unconscionable provision

Q—Is a Waiver a defense available to the Defendant? What is it?

Another contract defense often seen by Texas Collection attorneys is the contractual defense of waiver.  Waiver is usually defined as an intentional relinquishment of a known right and is either made expressly or indicated by conduct, that is inconsistent with an intent to claim such right.  Ulico Cas v. Allied Pilots 262 SW3d 773 (Tex. 2008). For instance, conduct such as prolonged silence or inaction may amount to a waiver. 

Waiver may be implied only to prevent fraud or inequitable consequences as plaintiff’s intent is the primary factor in determining waiver, in the absence of some clear intent, whether expressed by conduct, words or acts.  Should a defendant breach the contract, the plaintiff may later affirm such contract action and thus waive its waivered defense, by plaintiff either showing a conscious intent to do so or by acting to induce detrimental reliance on the part of the defendant. Consolidated v. Southern Steel 699 SW2d 188 (Tex. 1985).

Certain Texas collection cases have indicated that there are certain acts that do not necessarily constitute waiver, as follows:

  1. Plaintiff’s acceptance of defendants late performance, for instance, the defendant’s late payments may constitute waiver
  2. If a plaintiff continues his performance after defendant’s breach, that may be a waiver.
  3. If a plaintiff shows honest efforts to induce the defendant to perform the contract, then that will not necessarily constitute a waiver.

Q– What is a limitation-of-liability provision in a written contract?

Another contract defense is the limitation-of-liability provision.  Here, defendant asserts that his liability is limited by the contract itself.  These provisions are only enforceable if the agreements do not “violate public policy”.  Whether public policy has been violated in this context, a court may look at if there is any disparity in bargaining power between the parties. Allright v. Elledge 515 SW2d 266 (Tex. 1974).