The UK Supreme Court has recently followed the US approach to find that anti-oral variation clauses mandate the process for varying a contract.  In so doing, the Court has backflipped on the previous approach in the UK (and also in Australia) that such clauses were not effective in precluding oral variations.  There is now a difference of approach between UK and Australia in relation to these clauses, and it is important to note that oral variation of any contracts governed by English law would be permitted.

This UK Supreme Court case involved an “anti-oral variation” clause in a licence which provided as follows:

“This Licence sets out all of the terms as agreed between MWB and 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.”

There has been an ongoing debate about whether such clauses are effective or not.

English law had seemed to take the position that such clauses were not effective, because freedom of contract allowed parties to enter into any agreement at any time (including a variation of an agreement) and that freedom could not be thwarted by a clause in an earlier agreement (for example, Globe Motors Inc v TRW Lucas Variety Electric Steering Ltd[2016] 1 CLC 712). 

However, in this case, the UK Supreme Court majority has chosen instead to follow the US approach that such clauses mandate the process of variation.

In Australia, since the High Court decision in Liebe v Molloy (1906) 4 CLR 347, Courts have been prepared to find on sufficiently persuasive factual evidence that, notwithstanding an agreed writing requirement, the parties by express oral agreement or by contract implied from conduct have agreed to impose further or different rights and obligations on each other from those contained in the original contract.  What is sufficient evidence will depend on the particular circumstances, but all the usual requirements of formation must be present, including certainty of terms and real consideration for the variation.  Courts would look to factors such as the circumstances of the alleged variation agreement, including the authority of the person involved and the language used and whether objectively it can be concluded that the parties intended to vary the agreement without the previously agreed formality.

More recent Australian cases have expressly referred to the prior English approach (see for example Hussain v CSR Building Products Limited, in the matter of FPJ Group Pty Ltd (In Liq) [2016] FCA 392 (Edelman J) and Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91 which cited with approval the Court of Appeal decision in Rock Advertising that was overturned by the UK Supreme Court (at [35]).