The Georgia Court of Appeals held on Monday, March 1, 2021, that repeated late, irregular payments accepted by the party receiving payment creates a factual dispute as to whether a quasi-new agreement was created. See The Hatchett Firm, P.C. v. Atlanta Life Financial Group, Inc., A20A1723, 2021 WL 774596 (Ga. Ct. App. Mar., 1, 2021).
In Atlanta Life Financial Group, Inc., two entities were subleasing office space from a lessee that was in a Master Lease with the landlord. See Atlanta Life Financial Group, Inc., 2021 WL 774596 at *1. The subleasing began with one entity in 2014 and with the second entity in 2016. Id. In January 2018, both subtenants failed to pay the full amount of rent under the sublease. Id. In November 2018, both subtenants completely stopped paying rent. Id. On April 12, 2019 -- 16 months after the initial failure to pay full rent and 5 months after the complete failure to pay full rent -- the lessee objected to partial payment or nonpayment. Id. at *2. Approximately one month later the lessee brought suit against the subtenants for past rent due. Id. at 1.
The Court relied on a 2012 case, Circle K Stores v. T. O. H. Assoc., 318 Ga. App. 753, 654 (Ga. Ct. App. 2012), for the proposition that an affirmative notice is required to return to the original terms of a contract once a mutual departure from the terms of an agreement occur. Specifically, Circle K Stores, states:
A mutual departure from the terms of an agreement results in a quasi-new agreement suspending the original terms of the agreement until one party has given the other reasonable notice of its intent to rely on the original terms. The question whether the parties’ mutual conduct caused a waiver and effected a quasi-new agreement ordinarily is a question for the jury.
Turning to Supreme Court of Georgia precedent from 1979, the Court of Appeals ruled that evidence of repeated late, irregular payments accepted by the seller can be such a mutual departure. Id. at *2; See Smith v. Gen. Finance Corp. of Ga., 243 Ga. 500 (1979). Therefore, the Court reversed its summary judgment finding in favor of the lessee and stated a question of fact remains because the lessee did not object to the partial payment or nonpayment until 16 months after the first failure to pay in full.
The Court of Appeals also emphasized that a no-waiver or anti-waiver provision in a contract may itself be waived under Georgia law by performance such as the acceptance of irregular payments. Id. at *2; See Yash Solutions v. New York Global Consultants, 352 Ga. App. 127, 136 (Ga. Ct. App. 2019).
Lastly, looking forward, the Court of Appeals stated in dicta that the outcome may have been different had the lessee not accepted the partial rent payments without identifying to the tenant that he was underpaying the rent or had the lessee expressed its displeasure as a result of the partial or late payments. Id. at *2; citing Circle K Stores, 318 Ga. App. at 755; Duncan v. Lagunas, 253 Ga. 61, 62-63 (1984).
This case should remind businesses to send prompt notice anytime a breach of an agreement occurs.