So here’s an easy one for you: If a contract contains a clause providing that any variation of its terms must be in writing (an 'anti-oral variation clause'), can the parties subsequently vary the terms of that contract orally?
The answer is of course…. yes. That was the decision of the Court of Appeal in the recent case of Globe Motors, Inc & Ors v TRW Lucas Varity Electric Steering Ltd & Anor.
Why? Because the parties 'have freedom to agree whatever terms they choose to undertake, and can do so in a document, by word of mouth, or by conduct. The consequence in this context is that in principle the fact that the contract contains [an anti-oral variation clause] does not prevent them from making a new contract varying the contract by an oral agreement or by conduct' (Beatson LJ at paragraph 100 of the judgment). So is there any way that parties can ensure that a contract can only be varied by an agreement in writing?
No. The only restrictions placed upon the autonomy of parties to vary their contract are those placed upon them by law; for example, a contract for the sale of land must be writing, so any variation of such a contract must also be in writing.
However, there is still much to be said for including anti-oral variation clauses in contracts. The potential for disagreement as to whether or not an agreement to vary the contract has been reached (and is binding) is greatly reducing if nothing has been signed and the contract contains an anti-oral variation clause. The avoidance of disputes is what it’s all about.
For more information or to find out how we can help you, please contact a member of our Commercial and Property Litigation Team on 01279 755777.