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Publications: Alexander Georgiev

The Myth of the General Invalidity of the Waiver of Future Right. Set-off in the Light of the Waiver of Future Right

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Authors:Metodi Baykushev, Alexander Georgiev

Subject:Dispute resolution

Published at:http://epi.bg/

Edition:Commercial and Contractual Law Digest, 2019, book 8, book 9

Abstract:

The problem of the validity of the waiver of a future right through a contractual clause has great practical importance. Bulgarian case law and legal theory are consistent in the view that the waiver of future right is void. This stance is problematic in the context of rapidly developing and complicated economic relations. If we rephrase the US Supreme Court Justice Mr Holmes: Тhis is a wrong interpretation that “no lapse of time or respectable array of opinion should make us hesitate to correct”. The law should be applied in a way that is appropriate for its time.
Bulgarian applicable substantive law does not contain a general rule stipulating that a waiver of future rights is invalid. The general legal provision which sets out the rules on invalidity of contracts does not in principle forbid the waiver of future rights (it doesn’t even mention it). However, Bulgarian law explicitly proclaims the freedom of contract as an important general principle.
It is true that there are several specific rules where, under specific circumstances, a waiver of a future right is considered invalid. Such provisions are found in various substantive and procedural regulations, such as the Civil Procedure Code, Obligations and Contracts Act, Labour Code, Consumer Protection Act, Ownership Act and others.
However, if the waiver of a future right was invalid as a general rule, why would we find so many explicit rules rendering the waiver invalid in specific cases? Indeed, there are also a number of situations where the law does treat the waiver of future rights as valid. It’s apparent that where the law explicitly states that a waiver of a future right is invalid, it’s just an example of an exception to the general rule – that a waiver of future rights is admissible.
The general invalidity of the waiver of a future right concept can easily be tested by applying a specific legal institute. If we take the set-off, in some cases the debtor may be interested in maintaining its receivable due to the fact that set-off may be less favourable to it (for example, if its receivable bears interest). Under the Bulgarian law, the set-off takes effect from the moment the set-off was possible. Thus, when a set-off statement is issued, the interest would be discharged. Therefore, the party whose receivable bears interest will benefit from introducing a contractual clause which disallows the right to set-off.
Many waiver of a future right clauses can be found in public-private partnership contracts (e.g. Article 31.1 of the Sofia Airport Concession Agreement). Such clauses are essential for the viability of the modern forms of public-private partnership.
In fact, the waiver of future rights is often at the heart of the contractual relationship between the parties and frequently is a part of the contractual consideration - the obligations that a party undertakes under a particular contract in order to induce the other party to the contract to undertake correlated obligations. This makes it clear that the thesis of the invalidity of the waiver of future rights does not take into account the economic needs and business purposes that underpin the contractual relations in the civil and commercial turnover.

*This article is in Bulgarian.

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