A waiver is a legally binding provision where either party in a contract agrees to voluntarily forfeit a claim without the other party being liable. Waivers are commonly seen during settlement talks, when one party may be willing to pay out a slightly higher award, as long as the other person, often a claimant, agrees to sign a waiver relinquishing their right to further legal action.
Key Takeaways
- A waiver is a legally binding provision where either party in a contract agrees to voluntarily forfeit a claim without the other party being liable.
- Waivers can either be in written form or some form of action.
- Examples include waiving parental rights, liability waivers, tangible goods waivers, and waivers for grounds of inadmissibility.
- Waivers are common when finalizing lawsuits, as one party does not want the other pursuing them after a settlement is transferred.
- Waivers are signed to mitigate exposure to risk.
Understanding Waivers
A waiver is a demonstration, usually in written form, of a party’s intent to relinquish a legal right or claim. The key point to note is that the relinquishment is voluntary and can apply to a variety of legal situations.
Essentially, a waiver removes a potential liability for the other party in the agreement. For example, in a settlement between two parties, one party might, by means of a waiver, relinquish its right to pursue any further legal action once the settlement is finalized.
Waivers can be either in written form or some form of action. A waiver carried out by an action might be based on whether a party in an agreement acts on a right, such as the right to terminate the deal in the first year of the contract. If it does not terminate the deal before the first year, that party waives its right to do so in the future.
Examples of Waivers
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Waiving Parental Rights: In cases involving the custody of a child, a biological parent may choose to waive their legal rights as a parent, making that person ineligible to make determinations regarding the child’s upbringing. This allows a guardian who is not a biological parent to assert their right over a child through actions such as adoption.
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Waivers of Liability: Before participating in an activity that could lead to injury or death, a person may be required to sign a waiver as a form of expressed consent to the risks. This waiver would release the company facilitating the activity from liability should the participant be injured or killed. Examples include waivers used before participating in extreme sports or activities like skydiving.
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Waivers for Tangible Goods: In the case of most tangible goods or personal property, a person may waive the right to continue to make a claim on the item. This can apply to goods sold to a new buyer or donated to a particular entity. A transfer of vehicle ownership functions as a waiver of any claim to the item by the seller, giving the buyer new ownership rights.
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Waiver for Grounds of Inadmissibility: If a person who is not a citizen wishes to gain entry into the United States, they may be required to complete Form I-601, “Application for Waiver of Grounds of Inadmissibility.” This waiver seeks to change the status of the person seeking entry, allowing them to legally enter the United States.
Advantages and Disadvantages of Waivers
Depending on which side of the waiver you are on, the advantages and disadvantages are usually quite clear. For example, if someone is the claimant in a car accident, an insurance company would have the claimant sign a waiver as part of their settlement. This means that although the insurance company is paying a settlement, the claimant can no longer pursue legal action against the insurance company.
The advantage for the claimant is receiving a settlement package, while the advantage for the insurance company is mitigating the risk of future lawsuits. The disadvantage for the claimant is the inability to pursue future claims, while the insurance company might offer an inflated settlement to mitigate this potential risk.
Pros:
- Finalizes the arrangement
- Can lower insurance requirements for certain businesses that require waivers
Cons:
- Removes possibility of future legal action
- Sometimes forbids necessary actions that may require further attention
What is a Waiver of Subrogation?
A waiver of subrogation prevents either a person or company from pursuing damage collection from a third party. These waivers are common in construction contracts, leases, and property insurance contracts. Insurance companies often include clauses that prevent a party from being awarded a claim settlement if they waived subrogation.
What Is a Lien Waiver?
A lien waiver forfeits a counterparty’s right to place a lien on a payer’s property or goods. These waivers are common in the construction industry during various stages of construction and function similarly to receipts, preventing mechanics’ liens from being filed.
What Is a Medicaid Waiver?
A Medicaid waiver is signed by the state to waive certain Medicaid eligibility requirements, resulting in care being offered to people who may not otherwise be eligible. These waivers can be limited to specific medical diagnoses or geographic areas.
What Is a Fee Waiver?
A fee waiver reduces or eliminates fees for individuals enduring financial hardship. They can also be used to attract buyers or servicers by removing fee-related deterrents.
What is a GAP Waiver?
A GAP waiver, or Guaranteed Asset Protection waiver, absolves a person of remaining payments on an asset that has been destroyed, typically a car. This means if someone owes money on a vehicle that is irreparably damaged, they are not responsible for the remaining payments.
The Bottom Line
A waiver can be a great way to finalize an agreement between two parties, ending their relationship and mitigating future risk. However, there are significant drawbacks, especially if legitimate legal claims may arise in the future. Waivers are commonplace, such as in construction contracts, and usually exist to protect each individual party. Whether a waiver is advantageous or necessary depends on the unique circumstances of each event.
Related Terms: agreement, liability, legal action, settlement, subrogation, lien.
References
- U.S. Citizenship and Immigration Services. “I-601, Application for Waiver of Grounds of Inadmissibility”.
- U.S. Centers for Medicare & Medicaid Services. “State Medicaid Plans and Waivers”.
