MWB Business Exchange Centres Limited v Rock Advertising Limited [2016] EWCA Civ 553

Samuel Goldwyn once famously quipped “a verbal contract isn’t worth the paper its written on.” The point he was making is that contracts made verbally are inherently uncertain with the parties often arguing about what, if anything, has actually been agreed.

For this reason many written contracts include a clause which confirms that all variations need to be agreed in writing. These are known as ‘anti-oral variation clauses’ and are intended to promote certainty and avoid parties to a contract claiming that discussions they’ve had don’t end up varying the deal.

However the recent Court of Appeal case of MWB Business Exchange Centres Limited v Rock Advertising Limited casts serious doubt on the effectiveness of anti-oral variation clauses.

Rock occupied serviced office space as a licensee but fell into arrears of the licence fees. MWB purported to terminate the agreement and take back occupation of the office space. Rock argued that they were wrong to do so on the basis that in telephone conversations with a credit controller from MWB they had agreed to reschedule their licence fee payments and the licence had therefore been varied.

Disputing that there had been any oral variation of the licence agreement, MWB pointed to a clause within the licence which stated:

“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 decided that this clause did not prevent an oral variation to the licence agreement. It was felt that the anti-oral variation clause, like all clauses in a contract, was capable itself of variation if the parties so agreed - “The parties have made their own law by contracting, and can in principle unmake or re-make it.” It was sufficiently clear from the conversations that had taken place that there had been an intention by both parties to vary the payments under the licence agreement and in doing so the parties had waived reliance on the anti-oral variation clause.

Although it is likely that a court will require strong evidence before ruling that the parties have decided to act contrary to an anti-oral variation clause, the decision does, unfortunately, increase the prospect in contract disputes of false and frivolous claims of verbal variations having been agreed.

Key points

  • whilst this decision casts doubt as to the effectiveness of anti-oral variation clauses, it remains sensible that all variations are recorded in writing in order to promote certainty
  • it is important to ensure that all staff are aware that their verbal communications and actions could bind the company and they need to ensure that verbal communications are couched in such terms as to make it clear that no variations to contracts are agreed until such time as recorded in writing