In Rock Advertising Limited v MWB Business Exchange Centres Limited  UKSC 24, the Supreme Court has handed down a decision which has provided further certainty in the area of no oral variation /modification clauses, albeit in doing so it has overturned the decision of the Court of Appeal referred to previously in our blog of 7 July 2016.
The wording considered was “All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect”. The question was whether the schedule of payments had been revised orally.
The gave rise to the intrinsic issue of whether, by reaching an oral agreement to amend an agreement, you can at the same time be agreeing to dispense with a clause requiring written agreement to any amendment.
The majority held that the law should and does give effect to a contractual provision requiring specified formalities to be observed for a variation. This constrains party autonomy only insofar as, once made, the contract operates within its terms. Consideration was given to the reason for such clauses. It was held that the effect of such clauses is not that all variations are forbidden, but that they will be invalid. “The enforcement of a no oral [variation] clause therefore carries with it the risk that a party may act on a contract as varied by oral agreement, for example by performing it, and then find itself unable to enforce it”. Estoppel arguments could be raised, but were unsuccessful in this case.
Lord Briggs alone, whilst agreeing with the decision, did so on slightly different grounds, which he felt were aligned “more closely with the conceptual analysis adopted in other common law jurisdictions”.
In his view the parties can agree to remove the clause orally, but it will not be implied that they have done so where they agree orally upon a variation of the contract generally. The clause therefore remains in force and effect until the parties “agree to do away with it”.
Whichever route you prefer to get there, the impact is clear in that non-oral variation clauses will now be upheld. This is to be welcomed insofar as it gives effect to what the parties have agreed and therefore leads to certainty. Even on the majorities’ view it obviously remains open to the parties to reach an agreement, in accordance with the clause, to remove it…