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Anti-oral variation clauses are in fact worth the paper they’re written on….

In 2016 the Court of Appeal ruled that written contracts could be varied orally notwithstanding a clause that expressly prevents or restricts it (an ‘anti-oral variation clause’). However, earlier this year the issue came before the Supreme Court and the decision was overturned.

Original decision

The Court of Appeal had taken the view in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553 (“MWB”) that the principle of freedom to contract meant that parties could agree whatever, and however, they wish and therefore contractual clauses restricting this were unenforceable (see our article from July 2016 here). Whilst creating rather more flexibility for parties who wanted to vary contracts, this decision also meant a lack of legal certainty for parties entering into written contracts containing these clauses, and the scope for more disputes about whether terms had been varied. As many of us anticipated, the matter ended up before the Supreme Court.

An about-turn

The Supreme Court entirely reversed the decision on 16 May 2018, deciding that anti-oral variation clauses in contracts are in fact valid. The Supreme Court concluded, amongst other points, that contract law does not obstruct the legitimate interests of parties who wish to make their own rules restricting the variation of contracts. The full judgment is available here

In practice this means that the certainty offered by anti-oral variation clauses is back, and parties seeking to vary a contract, or who consider they have done so, should carefully consider any such clauses to ensure the variation is effective. Where a contract is varied, it is advisable to ensure that the negotiations and parties’ intentions are properly recorded in the event of any future dispute.

If you would like to discuss anything arising from this article please contact Sarah Holland on 0117 959 5438 or at sholland@loneystewartholland.co.uk.