The UK Court of Appeal has confirmed that parties may vary a contract orally despite the contract containing a clause requiring all variations to be in writing.
In this case, the defendant (Rock) leased premises from the claimant (MWB). Rock was unable to afford the rent and defaulted on payments. MWB terminated the contract and issued proceedings claiming the rent arrears. Rock argued that this termination was wrongful on the basis that its managing director had orally agreed a restructuring of the rent payments with the claimant’s credit controller. MWB responded by arguing that no such agreement had been made but, even if it had, it did not bind the parties because of clause 7.6 of the written agreement between the claimant and Rock which provided:
"This licence sets out all of the terms as agreed between MWB and the licensee. No other representations or terms shall apply or form part of this licence. All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect."
The Court of Appeal held that an oral agreement had been made between the claimant’s and defendant’s representatives and that this agreement bound the parties, despite clause 7.6. The Court of Appeal said that the most powerful factor in this decision was the need to respect the autonomy of the contracting parties and the principle that “whenever two men contract, no limitation self-imposed can destroy their power to contract again… ". The court was satisfied that any concerns about false allegations of oral variation could be dealt with by a court requiring evidence which showed, on the balance of probabilities, that a variation was indeed concluded.
This reasoning is likely to be followed in subsequent cases. However, it is still worth including anti-oral variation clauses in commercial agreements as most parties will, in practice, comply with them, thereby providing certainty around contractual terms. It will also be the presumptive starting point, requiring a party seeking to rely on an alleged oral variation to adduce clear evidence to establish this.
Interpretation of jurisdiction clauses
The High Court has been asked to determine whether a jurisdiction clause in a commercial agreement was exclusive or non-exclusive. As drafted, clause 9.1 said:
"[The defendant] agrees for the benefit of [Perella] that the courts of England will have non-exclusive jurisdiction to settle any dispute which may arise in connection with this engagement."
The proceedings concerned the repudiation of a contract. The defendant issued proceedings in Spain and the claimant, Perella, subsequently issued in England. The defendant applied to stay the English proceedings in favour of the Spanish court but Perella argued that the contract was subject to exclusive English jurisdiction.
The High Court held that the jurisdiction clause should be interpreted as drafted and was non-exclusive. Although the clause was expressed to be “for the benefit of Perella” this was not to be interpreted as meaning that Perella was entitled to insist on exclusive English jurisdiction. The ‘benefit’ was merely to enable Perella to invoke the (non-exclusive) jurisdiction of the English courts if it wished. It did not bar proceedings elsewhere by the defendant or, indeed, Perella.
The clause expressly referred to non-exclusive jurisdiction and a non-exclusive jurisdiction interpretation was consistent with business common sense. The fact that the clause gave an asymmetrical benefit to Perella was irrelevant in the interpretation.
Contract drafters can take comfort from this, and other recent rulings of the English courts, that the language of agreements, as drafted, will usually be given full effect. The courts will be slow to interfere with the autonomy of contracting parties by rewriting the agreement.
Repeal of S52 CDPA 1988
Section 52 of the Copyright Designs and Patents Act 1988 was repealed on 28 July 2016. Section 52 provided that when a work protected by artistic copyright had been exploited industrially (by making and selling more than 50 copies) the copyright term in the work was automatically reduced from the usual life of the author plus 70 years to just 25 years from the date of first marketing. Since 28 July, all artistic works (whether industrially exploited or not) have copyright protection for the life of the author plus 70 years. There are detailed transitional provisions. Copyright owners will welcome the repeal as meaning businesses will no longer be able to produce and sell ‘replica’ copies of products on the market.
The UK Intellectual Property Office has published guidance on the repeal.