A Commercial Court decision published earlier this month has considered the enforceability of so called “no amendment” clauses, requiring amendments to a contract to be made in writing and signed by the parties. Such clauses are widely used in construction contracts and are found in some standard forms such as the NEC. The present decision rules that an exchange of emails will be sufficient to overcome such clauses and may suggest that the protection afforded by such clauses is less than sometimes thought.
C&S Associates UK v Enterprise Insurance Company
Enterprise, an insurance company, entered into a contract with C&S, an insurance claims handler, for C&S to handle third party motor claims on behalf of Enterprise. The contract included a clause stating that: “Any variation of this Agreement shall not be effective unless made in writing and signed by or on behalf of each of the Parties to this Agreement”. Despite this clause, the Court determined that by a series of emails between Enterprise’s Head of Claims and a director of C&S, agreement was reached to an increase in fees and the introduction of a two year minimum contractual term.
Amongst other issues, the Court was asked to consider whether this agreement constituted a valid amendment to the contract. Mr Justice Males made the following observations:
- The drafting of the “no amendment” clause quoted above was broad enough to cover an agreement by email exchange. To avoid this interpretation, the clause would have to specifically carve out emails, require manuscript signatures, paper documents or both parties’ signatures on the same document.
- The Court of Appeal’s decision in Golden Ocean Group v Salgaocar Mining Industries could be applied by analogy, where it was held that agreement by a series of emails was capable of satisfying the requirements of the Statute of Frauds (i.e. that a contract of guarantee must be in writing and signed by or on behalf of each party). The signature blocks in the email chain between Enterprise’s Head of Claims and C&S’s director could therefore satisfy the signing requirements of the “no amendment” clause.
- There was nothing in the emails to suggest that the intention of the parties was for the agreement to be “subject to contract”, and all of the required components for a valid contract (agreement, intention to bind and consideration) were in existence.
Conclusions and implications
The wording of the “no amendment” clause in the present case resembles that contained in the NEC3 suite of contracts, which also requires that amendments be in writing and signed by the parties. Such wording is also widely used as boilerplate language in bespoke construction contracts. The present decision poses a question as to the extent of the protection provided by such provisions. Aside from purely oral agreements, such provisions would not appear to be effective to prevent amendments being agreed through any number of electronic means. An exchange of text messages, for example, might be thought to constitute an agreement “in writing and signed” if the senders had written their names at the end of each text message.
Where a greater degree of protection is sought from such clauses, the possible amendments noted by the court should be considered, such as the specification of paper documents or traditional manuscript signatures. Other, potentially more effective ways for parties to protect themselves against being bound to unintended agreements made by individual directors or senior personnel are to:
- Set out those persons or categories of people who have authority to agree amendments to the contract. Such a clause might, for example, specify the need for the agreement of two directors.
- Specify that any amendments agreed to the contract shall be “subject to contract” and enforceable only once certain formalities have been completed (e.g. paper agreement, manuscript signatures etc).
Such clauses will, however, always be capable of being waived by the parties at one level or another either expressly or through a course of dealing. Freedom of contract requires that parties cannot completely preclude themselves from making fresh agreements or amending existing ones.
The present decision also provides a reminder that notice provisions in contracts which provide for the giving of notices “in writing” will usually be satisfied by email correspondence. Those parties wishing to restrict the use of email in such circumstances will need to do so expressly.