The Importance of Follow-Up/Oversight on Contract Provisions

Companies should be aware that even when they have a written contract that spells out the parties’ responsibilities, e.g., pay rent monthly, they need to monitor compliance with those responsibilities.  Failure to do so – sloppy follow-up – can result in a “quasi-new agreement.”

The Georgia Court of Appeals’ recent decision in The Hatchett Firm, P.C. v. Atlanta Life Financial Group, Inc., 358 Ga. App. 607 (2021), vividly illustrates this point.  In that case, a sublessee paid partial rent payments for ten months and no rent for 6 months.  The sublessor sued the subtenant for the unpaid past due rent for that 16-month period.  It did so after giving the subtenant notice that the sublessor insisted on compliance with the terms of the sublease and pointing out the anti-waiver provision in the sublease.

The issue presented was, does the evidence of repeated late, irregular payments accepted by the sublessor create a factual dispute as to whether a quasi-new agreement was created.  The Court found there was an issue of fact for a jury to decide as to whether the acceptance of irregular payments created a quasi-new agreement, notwithstanding the anti-waiver provision in the sublease.

The Court noted that acceptance of irregular payments also raised a jury question as to whether the anti-waiver provision was waived.

This analysis is consistent with O.C.G.A. § 13-4-4:

Where parties, in the course of the execution of a contract, depart from its terms and pay or receive money under such departure, before either can recover for failure to pursue the letter of the agreement, reasonable notice must be given to the other of intention to rely on the exact terms of the agreement. The contract will be suspended by the departure until such notice.

The key provision in § 13-4-4 is the last sentence, “The contract will be suspended by the departure until such notice.”  Notice will reinstate the original agreement going forward, but not looking backwards in time.

The lesson to be learned is that compliance with contractual terms and responsibilities should be monitored and audited regularly to ensure you have the agreement you think you have, not a quasi-new agreement due to sloppy follow-up.

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