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Can you rely on changes made to a written contract, if those changes are agreed verbally?

21 May

Can you rely on changes made to a written contract, if those changes are agreed verbally?

By Tom Haywood, Solicitor

On the 16th May 2018, the Supreme Court gave judgment in Rock Advertising Limited v MWB Business Exchange Centres Limited [2018] UKSC 24. This case concerned to what extent parties can rely on changes to payment terms agreed verbally, rather than in writing.

Facts

In this case, Rock Advertising Limited (Rock) entered into a Licence with MWB Business Exchange Centres Limited for Rock to occupy offices in London. The Licence stated that any variation to the Licence needed to set out in writing and signed by all parties before they were effective. When Rock fell behind in paying the sums owed, a verbal agreement was made to alter the payment terms. One of the questions to be decided was if the variation was valid.

The Supreme Court held that the oral variation was not valid and that the parties were required to alter the contract in accordance with the contract – i.e. in writing and signed by all the parties. The Court held that there are some narrow exceptions to this rule, which did not apply in this case.  

Commentary

“No oral variation” clauses of the type above are common in commercial contracts. They try to prevent uncertainty between the parties.  They are included to ensure that contracts which have been carefully drafted and negotiated by lawyers, can’t be signed off by the parties then renegotiated over the telephone shortly afterwards.

Even the most honest, well meaning parties on different sides of an agreement can have different interpretations of what they have agreed. If one party is dishonest they can easily argue that the parties have verbally altered the agreement to their advantage. For that reason, it is common to include “no oral variation” clauses. Our advice has always been that any amendments to contracts should always be in writing!

What this judgment means to you

This judgment means that if a contract does include a “no oral variation” clause, it may be enforceable. In our example above, the parties would be entitled to rely on the original, written contract and not any subsequent amendments made over the telephone/in a meeting/late night in the pub after a few drinks…

Parties to a contract should always ensure that they understand what they are signing and should ask their solicitor if they do not. They must treat drafting variations to a contract as seriously as drafting the contract itself and should take legal advice.

Whether you are entering into an agreement, wish to alter it or require advice about enforcement, it’s important to seek legal advice.

Contact our expert team at Bell & Buxton Solicitors for no-nonsense, cost effective legal advice.