Beware the Boilerplate: Waiver Provisions
What is a waiver?
Loan documents (generally the note, security instrument and guaranty) often contain waiver provisions. Some common waivers are indemnity provisions, waiver of the right to jury trial, waiver of defenses and waiver of notice. While parties seeking waivers might favor sneaking such provisions into the document, this can often backfire—and it is sure to for the waivers litigants care about most.
A “waiver” is the relinquishment of a right that is both (1) knowing and (2) voluntary. One way to help your lawyer show that a waiver in a contract is both knowing and voluntary is to make it conspicuous in the document.
How do I make a waiver conspicuous?
Simply put, a conspicuous waiver is one that jumps out at you. Use of ALL CAPS, contrasting type or color, for example, qualifies as conspicuous. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 511 (Tex.1993). The most common, and probably best practice, is to make a provision conspicuous by setting it apart in bold, all-cap letters. E.g. In re Gen. Elec. Capital Corp., 203 S.W.3d 314, 316 (Tex. 2006) (orig. proceeding) (recognizing that contractual jury waiver provision that was “conspicuous”—because it was in bolded font and in all capital letters—met burden of party seeking to enforce provision to make prima facie showing that waiver was knowing and voluntary). Using a heading in addition that specifically states “waiver of jury trial” or “waiver of defenses” enhances conspicuousness and makes waiver provisions easier to defend.
Why is conspicuousness so important?
A conspicuous waiver is presumed to be knowing and voluntary, which shifts the burden to the other party to negate the presumption. Coupled with the general legal principle that persons are charged with knowledge of the contracts they sign and cannot use failure to read as a defense, In re Lyon Fin. Services, Inc., 257 S.W.3d 228, 232-33 (Tex. 2008), conspicuous waivers can be hard to beat.
More importantly, in the case of “extraordinary” risk-shifting waivers (you can read that as “waivers lenders should care about most”), conspicuousness is required. Examples of extraordinary waivers are indemnity agreements, agreements to release another in advance from liability for the other’s negligence, and waivers of jury trial. See Littlefield v. Schaefer, 955 S.W.2d 272, 273 (Tex.1997); Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex.1993); In re Bank of Am., 278 S.W.342 (Tex. 2009).
Extraordinary or not, every waiver could benefit from being conspicuous.