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Simple English definitions for legal terms
waiver of claims and defenses
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A quick definition of waiver of claims and defenses:
A waiver of claims and defenses is when someone intentionally gives up their right to argue against someone else who has taken over their contract. This means they cannot use any reasons they may have had against the original person to argue against the new person. It is usually written in a contract as a clause that says this is what will happen.
A more thorough explanation:
Waiver of claims and defenses refers to the intentional giving up of the right to assert any claims or defenses against an assignee by the maker, drawer, or other obligor under a contract. This is usually done in a contractual clause.
1. A borrower takes out a loan from a bank and signs a contract that includes a waiver of claims and defenses clause. The borrower later defaults on the loan and the bank assigns the debt to a collection agency. The borrower cannot assert any claims or defenses against the collection agency because of the waiver clause.
2. A company sells its accounts receivable to a factoring company and includes a waiver of claims and defenses clause in the contract. If any of the customers whose accounts were sold dispute the payment, they cannot assert any claims or defenses against the factoring company because of the waiver clause.
These examples illustrate how a waiver of claims and defenses clause can protect the assignee from any claims or defenses that the obligor may have against the assignor. It is important to read and understand the terms of a contract before signing it, especially if it includes a waiver clause.