Contracts often contain clauses which exclude oral amendments. The purpose of these clauses is to ensure that contracts cannot be amended informally, but in the case of MWB Business Exchange Centres Ltd v. Rock Advertising Ltd, the Court of Appeal ruled that a contract could be amended even though oral variations had been excluded.
MWB Business Exchange Centres Ltd (MWB) owned serviced offices and Rock Advertising Ltd (Rock) was its licensee. Rock allowed arrears of £12,000 to accrue and MWB excluded the company from the premises. There was a discussion between the parties where Rock asked to be allowed back into occupation if it made monthly payments of £3,500. Rock claimed that its proposal had been accepted and paid £3,500 on the same day. MWB kept the payment but wrote to Rock two days later to reject the repayment proposal.
MWB issued a claim for the arrears and the Court of Appeal eventually decided the following: MWB and Rock were entitled to orally amend the licence despite the exclusion because commercial parties should be free to agree amendments which reflect changing circumstances.
For the amendment to take effect, MWB would also need to derive a benefit (consideration) from Rock’s proposal. Part payment of a debt i.e. £3,500 per month is not normally good consideration but MWB benefitted because the premises would otherwise have remained empty.
Care needs to be taken when negotiating amendments because this case creates uncertainty. If it is not feasible to negotiate by written exchanges marked ’subject to contract’, the party receiving the request should insist that any amendment be recorded in writing and should make a note of the fact that it insisted upon a written amendment when it was negotiating. If one party proposes an unacceptable amendment and pays money in support of its proposal then the monies should be repaid immediately.
For more information on oral variations and how we can help you, please contact a member of our Commercial and Property Litigation Team on 01279 755777.