What is a Conditional Waiver?

A conditional waiver is when a person agrees to waive certain rights when and if a second party completes the requirements designated in an agreement between the parties. Conditional waivers are frequently used in construction agreements. The conditional waiver concept may also be used in other transactions so long as the terms are set forth in the agreement.

In a construction or remodeling agreement, the party doing the construction under the contract usually has a right to file a lien against the party paying for the work until the invoice has been paid in full. Many of these construction and remodeling agreements require partial payments throughout the term of the construction project. The party paying for the work typically won't agree to make partial payments unless he or she gains a release of liability from the party doing the work, however.

As part of the partial payment process, the contractor prepares a document that includes a conditional waiver of the right to file a lien against the homeowner in return for the homeowner making a partial payment. The contractor will not have to release his rights to file a lien until he or she has received the funds paid as part of the partial payment. Once the funds have been received in the contractor’s account, the contractor is no longer permitted to file a lien against the homeowner for that portion of the partial payment. The parties will proceed with a document describing the terms of the conditional waiver until such time as the final payment becomes due. At that time, the contractor will sign a document stating that he or she will grant an unconditional waiver that removes his or her right to file a lien against the homeowner for any portion of the payment since the contractor has been paid in full.

The conditional waiver concept may also be used in other forms of transactions in which there are partial payments or partial deliveries during the course of the transaction. The parties will define the terms of the conditional waiver and the requirements for the granting of such a waiver within the transactional documents. As the transaction proceeds, the parties document any partial payments or deliveries as well as the conditional waivers granted. To the extent it is necessary for such a transaction, the parties will complete an unconditional waiver at the end of the transaction as well.