Oral Contract Variation Can Override Contract Terms

The Court of Appeal has ruled in favour of a Defendant who argued a contract had been orally varied despite a clause in that contract stating that any variations must be in writing.

In the case of MWB v Rock Advertising, the Defendant was a tenant of the Claimant. The Defendant defaulted on its rent payments and fell into arrears, and the Claimant terminated the contract and issued legal proceedings for rent arrears.

However, the Defendant argued that the termination of the contract was invalid, on the basis that its managing director had agreed new rent terms with the Claimant's credit controller. The Claimant rejected this suggestion and, further, adopted the position that even if such an oral variation had taken place, it would not be binding because of an anti-oral variation clause in agreement between the parties. The clause clearly stated that any variation must be set out in writing and signed by the parties.

The Court of Appeal found in favour of the Defendant, after evidence was put before the court showing that, on the balance of probabilities, an oral variation had occurred. That evidence was sufficient for the Court to find the contract had been varied, despite the clause referred to above.

The reasoning of the court in this case is likely to serve as authority on oral variations to contracts, though it is important to note that where there is a no oral-variation clause this will invariably be the starting point for the Court; the development is that the Court will hear evidence on oral variations and, if that evidence is sufficient, intervene to override such a clause. The ruling is in line with the general approach of the Courts not to intervene with the intentions or agreements of contracting parties without proper reason.

If you have any questions on the above, please do not hesitate to contact the team at McDaniel & Co. on 0191 281 4000 or legal@mcdanielslaw.com.