Rock Advertising Limited v MWB Business Exchange Centres Limited [2018] UKSC 24
Facts
Rock and MWB entered into a written contract containing a No Oral Modification (“NOM”) clause which provided that any variation:
“must be agreed, set out in writing and signed on behalf of both parties before they take effect.”
Issues
The issue was whether the NOM clause was effective. The Court of Appeal, in finding that the clause was ineffective, accepted the following arguments:
- A variation of a contract is itself a contract;
- As the common law imposes no requirements relating to the form of a contract, the parties were free to ignore an existing clause which imposes such requirements;
- The parties must have intended to dispense with the contractual formality by their mere act of agreeing an oral variation notwithstanding the written term.
Decision
The case went to the Supreme Court where, by a majority of 4:1, the decision of the Court of Appeal was reversed. Lord Sumption gave the leading judgment. He concluded:
“In my opinion the law should and does give effect to a contractual provision requiring specified formalities to be observed for a variation.”
The arguments advanced were “entirely conceptual” but that there was no conceptual inconsistency between a general rule allowing contracts to be informal and a specific rule that effect would be given to requirement for formalities to be observed.
Comment
This decision shows that the Supreme Court placed a premium on contractual certainty, perhaps at the expense of commercial flexibility and at the risk that parties may have acted on invalid oral variations. In the regard the decision does recognise that in future cases, a party which has acted to its detriment on an oral variation, may seek to rely on estoppel principles in order to circumvent the effect of a NOM clause.
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