Legal Definitions - waiver of claims and defenses

The term waiver of claims and defenses refers to a situation where a person or entity who owes money or has an obligation under a contract agrees to give up their right to raise certain issues or complaints against a new party who has taken over that contract.

Imagine you have a contract with Company A, and Company A then transfers that contract to Company B. A waiver of claims and defenses means that you agree you won't use any problems you had with Company A as a reason to avoid your obligations to Company B. It's an intentional agreement to relinquish the ability to assert those arguments against the new party.

This waiver is often included as a specific clause within the original contract itself, making it a binding part of the agreement from the start.

Here are some examples to illustrate this concept:

• Car Loan Assignment: Sarah buys a new car from "Speedy Motors" and finances it through the dealership. Her loan agreement includes a clause stating a waiver of claims and defenses. Speedy Motors then sells Sarah's loan contract to "National Bank." A few months later, Sarah discovers that Speedy Motors misrepresented the car's fuel efficiency. Despite her valid claim against Speedy Motors, the waiver clause in her original loan agreement means she generally cannot use this misrepresentation as a reason to stop making payments to National Bank. She must continue paying National Bank, even while she might pursue a separate claim against Speedy Motors.

• Business Equipment Lease: "Tech Solutions Inc." leases several specialized computers from "Office Gear Leasing." The lease agreement contains a waiver of claims and defenses. Office Gear Leasing then sells the right to receive the lease payments to "Capital Finance Group." If the computers later prove to be defective and Office Gear Leasing is slow to provide repairs or replacements, Tech Solutions Inc. is still obligated to make its lease payments to Capital Finance Group. The waiver prevents Tech Solutions Inc. from using the equipment's defects (a claim against Office Gear Leasing) as a reason to withhold payments from Capital Finance Group.

• Home Appliance Financing: Mark purchases a high-end refrigerator from "Appliance World" and finances it directly through their in-store credit program. The financing contract includes a waiver of claims and defenses. Appliance World then sells Mark's financing agreement to "Consumer Credit Corp." A few weeks later, the refrigerator completely breaks down, and Appliance World refuses to honor the warranty, claiming it was user error. Despite his dispute with Appliance World, Mark's waiver means he generally cannot stop making his monthly payments to Consumer Credit Corp. He must continue paying Consumer Credit Corp while he separately tries to resolve the warranty issue with Appliance World.