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Oral Variation of Contracts – A Little Less Conversation…

22 Jun 2018

 

The vast majority of well drafted contracts will contain a clause saying that the contract cannot be amended orally and that any variation must be in writing. The clause may also stipulate additional requirements, such as that the variation must be signed.

 

These clauses give comfort that a party will not accidentally, during what they believe is a throwaway conversation, amend the terms of the contract. Also, from an evidential point of view a written variation is preferable to avoid disputes as to what was said during the conversation.

 

The Supreme Court in the recent case of Rock Advertising Ltd (“Rock”) v MWB Business Exchange Centres Ltd (“MWB”) (2018) considered whether a purported oral variation was valid notwithstanding the presence of a clause saying that a contract could not be varied orally. This at first glance appears a fairly easy question to answer. However, the courts which considered the issue in this case before it reached the Supreme Court reached the opposite decisions.

 

MWB operated business centres which provided space for businesses to use. Rock used one of these spaces but fell behind on its rent. The contract between MWB and Rock stated that "All variations to this contract must be agreed, set out in writing and signed on behalf of both parties before they take effect".

 

During a conversation, a schedule of payments was mentioned which varied the contract terms.

MWB evicted Rock from its office and sued for the outstanding rent. Rock counterclaimed for wrongful eviction.

 

The question the court had to answer was whether the variation was valid notwithstanding the clause which prevented oral variations.

 

The Supreme Court decided that the clause which stated that variations needed to be made in writing and be signed meant that the purported variation was not binding.

Consequently, MWB had been permitted to evict Rock and Rock’s counterclaim for wrongful eviction failed.

 

This decision will give comfort to those using terms and conditions that they will, by and large, be able to rely on them and that the courts will give effect to them.

 

The courts will look to give effect to the intention of the parties at the time the contract is made – if they agree (as Rock and MWB did in this case) that they will not allow oral variations then the courts will not allow oral variations. To be otherwise would be to destroy the very essence of the purpose of contracts which is to enable the parties to agree and understand how they will do business with each other.

 

It also shows the importance of having well drafted terms and conditions. If the clause in this case was not as well drafted or there had been no mention of variation, then the oral variation would likely have been allowed which would have put MWB in a much worse position.

 

If you have any queries regarding contracts, terms and conditions or other commercial or corporate matters please contact Chris Morgan, a solicitor in our commercial and corporate department on 0191 211 1515 or at chris.morgan@srflegal.co.uk.

 

 

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Short Richardson and Forth Solicitors Limited is a private limited company registered in England and Wales under company number 10572065, authorised and regulated by the Solicitors Regulation Authority No 637150.

Short Richardson and Forth Solicitors Limited is a private limited company constituted and run in accordance with the provisions of the Companies Act 2006. The term “partner” has been used to denote individual senior solicitors employed by Short Richardson and Forth Solicitors Limited.