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McKnight v. Bochey

A-694-00T2 (N.J. Super. App. Div. 2002) (Unpublished)

CONTRACTS; WAIVER— Accepting payments for years, without objection, where those payments are known to be far less than what an agreement would have otherwise called for, constitutes a waiver.

The hiring manager of a company and a friend entered into an oral agreement to have a computer consulting business, owned by the friend, refer computer program consultants to the manager’s employer. The two friends initially agreed to split the revenue and profits of the computer consulting business equally, even though the arrangement appeared to be a scheme to defraud the employer who did not know that its hiring manager was getting a share of the profits from the computer consulting business. Shortly after this arrangement began, the company employee’s friend was transferred to England. The hiring manager who remained behind contended that because of that transfer, he would have to run the business himself and that his friend in England should receive five percent of the computer consulting company’s gross margin instead of an equal split. The hiring manager assumed an alias and ran the business. For three years, he sent quarterly checks to his friend in England which clearly represented far less than fifty percent of the revenues. The “partner” in the United States contended that each quarterly check represented five percent of the company’s gross margin except that one of the checks included a return of all of his friend’s paid-in equity. That check was accompanied by a letter explaining it. The friend in England claimed that he accepted the lesser payments because he felt that his “partner” may have been covering other expenses and that any disparity would be settled later. Eventually, the hiring manager was laid off by his employer and shifted the entire business to a new company. He continued to send small checks to his friend in England until about the time that the arrangement with his former employer ended. When his friend returned from England, he claimed that he was entitled to the difference between what he had received and the fifty percent agreement. The lower court held that because the friend in England had accepted monies for many years without raising a word of protest, his actions constituted a waiver and that no reasonable finder of fact could conclude otherwise. The Appellate Division found no error in the lower court’s summary judgment determination of waiver, which is the “voluntary relinquishment of a known right evidenced by a clear, unequivocal and decisive act from which an intention to relinquish the right can be based.” Here, the friend in England “continued to accept quarterly payments that he knew were considerably less than the fifty-percent share to which he believed he was entitled.” Also, he knew from the beginning that his friend in the United States was “receiving a substantially greater share of [the computer consultant company’s] profits than he was receiving.” Nevertheless, he continued to accept the payments without voicing any objection. Importantly, the Court felt that “the sole purpose for this rather unsavory business venture was to shield [the hiring manager’s] self dealing from [his employer].” In fact, the hiring manager used an alias so that the consultants could not associate him with the computer consulting company. “Thus, the sole purpose [of the computer consultant company’s] involvement in this venture vanished when [the hiring manager] was laid off by [his employer].” That made the hiring manager’s subsequent actions more understandable and “less venal” than argued by his friend in England.


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