The Supreme Court in Rock Advertising Ltd v MWB Business Exchange Centres Ltd has provided clarity over a fundamental point of contract law. Can the parties to a contract beware oral variations upon its terms, despite a boiler plate clause requiring all variations to be in writing and signed by both parties?
The facts of the case were straightforward. Rock rented an office from MWB, pursuant to a contractual Licence Agreement. Rock and MWB had agreed a schedule of payments to settle licence fee arrears but made the agreement over the telephone. It was not committed to writing and signed by both parties in accordance with the strict terms of the Licence Agreement. When MWB subsequently excluded Rock from the premises, the County Court was asked to determine whether the oral variation of the Agreement bound the parties. It decided that it did not due to the existence of the “no oral variation” clause. The Court of Appeal however overturned this decision, leading commentators to protest that there would be a flood of opportunistic arguments and claims.
Unsurprisingly MWB appealed to the Supreme Court which unanimously allowed the appeal. The decision appears based in common sense and is consistent with other authorities which emphasise that in interpreting a contract, a court will look to the intention of the parties. Clearly the intention here was for variations to be made in writing.
Therefore parties to a contract who negotiate variations are strongly advised to check the formalities in that contract for such variations and ensure they are complied with. Otherwise as a consequence of this recent Supreme Court decision the variation is likely to be unenforceable. Such formalities are often buried in the boilerplate section, at the end of a contract and often overlooked by contracting parties when negotiating terms. The devil is in the detail!
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