Waivers by contract and estoppel: Little & Anor v Olympian Homes Ltd

In the recent case of Little & Anor v Olympian Homes Ltd [2024] EWHC 1766 (Ch), the court considered the concept of waiver in the context of a loan agreement.

Two personal guarantors applied to the court to set aside statutory demands served on them in relation to amounts due under a loan to a company owned by one of the guarantors, claiming that the debts were not owing (or were at least disputed on substantial grounds). A subsequent agreement with the borrower had seen two tranches of the loan repaid, but some principal remained outstanding – and no interest was ever paid. The lender claimed the guarantors owed interest on the outstanding amount, which the guarantors disputed on the grounds of waiver, arising either by contract or by estoppel.

Waiver by contract

The guarantors argued that the lender had waived its right to claim interest through contractual waiver set out in email correspondence. The court rejected this argument, noting that the emails primarily concerned the repayment of the loan principal and the release of security, with no clear request to the lender to waive the interest.

Interestingly, the judge noted that consideration is not essential to a contractual waiver, unless the waiver is appropriately characterised as a variation to the contractual terms.

Waiver by estoppel

The guarantors argued that they had relied on an email from the lender, which attached a draft deed of release releasing the guarantors from the terms of the loan agreement and guarantees. The judge held that this email was sufficient basis to find that there was a genuine triable issue on the basis of waiver by estoppel because:

• Representation or promise: the email from the lender’s authorised agent was a clear representation that the guarantors were released from the originally agreed terms.
• Intention to induce reliance: the language of the email and its attachments indicated an intention to induce reliance. The source of the email was also relevant (coming from an authorised agent of the lender).
• Actual and reasonable reliance: both the borrower and the guarantors took steps in reliance: the borrower did not pay interest and the guarantors provided services free of charge to the lender.
• Inequity: it would have been inequitable for the lender to go back on its implied promise because the issue of interest was not raised for nearly a year.

The court therefore set aside the statutory demands.

Key takeaway

The case underscores the importance of clear and unequivocal communication in financial agreements. Lenders, borrowers and guarantors should ensure that any intended waivers or variations to contractual terms are clearly documented, ideally in a separate document rather than by email. This case also highlights the potential for a waiver by estoppel to arise from email communications, emphasising the need for careful drafting and consideration of the implications of such communications.