Waiver

What Is a Waiver?

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 of waivers include the waiving of parental rights, waiving liability, 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 in order 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 real or 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.

Since the party signing the waiver is surrendering a claim that they are entitled to, it stands to reason that they will, usually, only do so if they are receiving some added benefit.

Waivers can either be 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, which would be the act of "absence of action," before the first year, that party waives its right to do so in the future.

Examples of Waivers

  • Waiving of 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 also allows a guardian who is not a biological parent to attempt to assert their right over a child through actions such as adoption.
  • 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 that exist, due to the inherent nature of the activity. This waiver would release the company facilitating the activity from liability should the participant be injured or killed during their participation. Such waivers may be used prior to participating in extreme sports, such as BMX racing, or other activities, such as skydiving.
  • Waivers and 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 that are 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, and it gives the right to the buyer as the new owner.
  • Waiver for Grounds of Inadmissibility: If a person who is not a citizen of the United States wishes to gain entry, 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 the ability to enter the United States legally.

Advantages and Disadvantages of Waivers

Depending on which side of the waiver you are on, the advantages and disadvantages are usually quite clear. If someone is the claimant in, say, a car accident, an insurance company would have the claimant sign a waiver as part of their settlement offer. This means that although the insurance company is paying a settlement to the claimant, the claimant can no longer pursue legal action against the insurance company.

The advantage for the claimant in this example would be that they are given a settlement package. The advantage to the insurance company is that once the claimant signs the waiver, their responsibility to the claimant, as well as the exposure to a future lawsuit, is waived.

The disadvantages in this example for the claimant are the same as the advantages for the insurance company. They would be unable to pursue a future claim. The insurance company will usually pay an inflated settlement offer, especially if they feel the claimant may have a legitimate claim in the future, and the company is attempting to mitigate that risk before it materializes. Due t the nature of waivers, they can be either advantageous or disadvantageous, depending on which side you are on and the circumstances surrounding the event.

Pros
  • Finalizes the arrangement

  • Can lower insurance requirements for certain businesses that require waivers

Cons
  • Removes possibility of future legal action

  • Sometimes things require additional attention, but a waiver forbids necessary action

What is a Waiver of Subrogation?

A waiver of subrogation is a waiver that prevents either a person or company from pursuing damage collection from a third party. Waivers of subrogation are commonly seen in construction contracts, leases, and property insurance contracts. Insurance companies will commonly add causes that prevent a party from being awarded an insurance claim settlement if they waived subrogation.

What Is a Lien Waiver?

A lien waiver is a waiver that forfeits a counterparty's right to place a lien on a payer's property or goods. These are common in the construction business during various stages of construction. A lien waiver is similar to a receipt and can prevent a mechanics' lien from being filed.

What Is a Medicaid Waiver?

A medicaid waiver is a waiver that is signed by the state that can waive certain Medicaid eligibility requirements. This would result in care being offered to people who may not have otherwise been eligible for Medicaid. The waivers can be limited in certain ways and could be limited to certain medical diagnoses, or enact geographic limitations.

What Is a Fee Waiver?

A fee waiver is a waiver that is signed in order to reduce the fee amount, either partially or fully, of someone who is typically enduring a period of financial hardship. They can also be used to entice a buyer or servicer, when the fee might be a deterrent and mean the difference between closing the sale or losing it.

What is a GAP Waiver?

A GAP waiver, which stands for Guaranteed Asset Protection waiver, is a waiver that absolves a person of the remaining payments on an asset that has been destroyed, typically a car. This means that if someone owed money on a car, and the car was damaged beyond salvaging, they are not responsible for the remaining payments. A GAP waiver could also be considered a cancellation of debt.

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 to waivers, especially if there are legitimate legal claims that may arise in the future. Waivers can be commonplace, such as when negotiating construction contracts, and usually exist for the protection of each individual party. Whether a waiver is advantageous or even necessary depends on the unique circumstances of each event.

Article Sources
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  1. https://www.cms.gov/Outreach-and-Education/American-Indian-Alaska-Native/AIAN/LTSS-TA-Center/info/state-medicaid-policies

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