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Billman v. V.I. Equities Corp. - 743 F.2d 1021 (3d Cir. 1984)

Rule:

In analyzing whether there was a waiver, the court must ask whether there was a promise, express or implied in fact, supported only by action in reliance thereon, to excuse performance of a condition. 

Facts:

Plaintiff landlords executed a 20-year lease with defendant lessee, which could be extended for two additional 5-year terms. The lessee assigned an interest to a sublessee, but the sublessee did not receive authorization to renew. The sublessee communicated, by letter, its intent to the landlords to use the renewal option when the lessee did. The landlords did not respond directly, but other correspondence indicated approval. Nearly 10 years after the letter was sent, and four days after the original lease term had expired, plaintiff landlords claimed that the sublessee did not have the right to renew, so that both lessee and sublessee violated the lease. The landlords brought an action for unlawful detainer, and the District Court of the Virgin Islands Division of St. Croix found in favor of the landlords' in their action for unlawful detainer. Defendants lessee and sublessee appealed.

Issue:

Did the landlord waive their right to insist on strict compliance of their contract in their failure to assert the same?

Answer:

Yes

Conclusion:

The landlords were found to have waived their right to insist on strict compliance simply because they did, in effect, promised not to assert it. Three factors must be present if a waiver is to be found: first, the landlords must have promised not to enforce the condition of the option; second, the lessee must have relied to its detriment on the landlords' promise; and third, in view of the detrimental reliance, justice must require enforcement of a waiver. The appellate court reviewed and determined that those three factors were present in this case. First, it is clear from the district court's opinion that the landlords impliedly promised not to enforce the condition. Second, the lessee clearly relied to its detriment on the landlords' promise. The landlords promised to waive their right to insist that only Mr. Hilty (lessee) or his successors and assigns could renew the lease. The lessee relied on that promise to its detriment. The landlords' silence, when they had a duty to speak, indicated that the option to renew had been properly exercised. The lessee relied to its detriment, because the notice to vacate came four days after the original lease period ended. Finally, justice required waiver to be applied because the landlords new of the intent to renew for nearly 10 years before the lease expired.

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