When is a Contract Written in Stone – Part 2

Last month Partner Andrew Cromby considered whether it was ever possible for a written contract to be drafted in such a way that it could not be…

Last month Partner Andrew Cromby considered whether it was ever possible for a written contract to be drafted in such a way that it could not be varied, orally. A new development may make it even harder…

In my last article, I concluded that even where a contract contains a provision expressly prohibiting a subsequent oral variation taking place, such variations can be difficult to prevent. In simple terms, this is because the Court has previously expressed the view that the parties to a contract have the right to modify their agreement, if they chose, and even to change their mind about how the contract’s terms can be altered.

In the world of commerce, this is important – because contracts change in the real world and the terms set out in the parties’ contract may no longer reflect what has subsequently been agreed. That can give rise to confusion and uncertainty.

This month the reported case of Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24 has addressed this very point. 

Interestingly the conclusion that the Supreme Court reached was that a clause intended to prevent oral variations to a written contract WAS effective. It held that it could not be assumed that the intention of the parties was to dispense with the effect of the “no oral variation clause”.  Something more was required to permit the written terms to be varied than just an oral agreement – whether that was conduct or something else.

In its judgment, the Supreme Court referred to a case in which I acted for the successful defendant in 2003 - Actionstrength Ltd (t/a Vital Resources) v International Glass Engineering IN.GL.EN SpA [2003] UKHL 17.  In that case the requirement that a written instrument or memorandum must exist in order for a guarantee to be enforceable was tested.  On that occasion the House of Lords confirmed that something was needed “in writing”, to permit the guarantee to be enforced.  The parallel in relation to oral variations is that something more than just an oral variation is needed to dispense with the requirement to vary in writing.

This is an interesting development.  It still doesn’t appear entirely impossible to sidestep the effect of a clause prohibiting an oral variation – but it may have just gotten that much harder!

Andrew Cromby is a Partner and specialist in commercial litigation and dispute resolution at national law firm Weightmans LLP

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