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When a party to a contract is aware of conduct on the part of the other party that constitutes a breach and fails to protest the breach while continuing to perform the contract, that party may be held to have waived its right to rely on the breach in subsequent litigation.
Appellee landlord brought an action against appellants, a supermarket, a prior tenant, and a liquor store, alleging that the liquor store had been relocated to a partitioned area of the supermarket without the landlord's consent and that this violated the lease's use and sublease clauses. Appellants argued that the landlord clearly manifested its acquiescence in the move of the liquor store onto the supermarket premises. According to the appellants, the landlord's general manager, upon learning of the relocation, made a conscious decision not to protest it, and maintained this posture for the next six years. The district court entered judgment in favor of the appellee landlord. Appellants sought review of the decision.
Did the appellee landlord waive its right to insist on strict performance of the lease with respect to the relocation?
The judgment of the superior court was reversed. The court found that the landlord had full knowledge of the relocation, and facilitated it, and also had full knowledge of the continued sales of liquor by the liquor store from within the supermarket premises. The court noted that the landlord's general manager, upon learning of the relocation, made a conscious decision not to protest it. He maintained this posture for the next six years. At the time of the supermarket's acquisition of the prior tenant, the supermarket sought information and a certificate as to whether the prior tenant was in default on the lease. The landlord had a duty to declare itself on that subject, but did not claim that a default existed. Instead, it maintained its noncommittal stance. These acts prejudiced the prior tenant and the supermarket. The combination of acquiescence and assistance in the relocation, consciously declining to declare a breach, even upon request, and prejudice led to the conclusion that the landlord waived its right to claim that the lease was breached. Finally, no provision of the lease prevented the waiver.