Variation of Contracts – increased certainty or rigidity?

The Supreme Court has recently made an important ruling clarifying the way in which contracts may be varied.

In Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, the Supreme Court considered whether a contract with a ‘No Oral Modification’ clause could be varied other than in accordance with that clause.

The Supreme Court ruled that “the law should and does give effect to a contractual provision requiring specified formalities to be observed for a variation”. ‘No Oral Modification’ clauses are commonly included in contracts, and arguably this is because the high level of flexibility created by allowing oral variations is not always welcomed by businesses. The Court also noted that the ‘No Oral Modification’ formality allows companies to monitor internal rules restricting the authority to agree variations.

This ruling illustrates the balancing exercise that the Court must undertake between creating certainty and allowing flexibility in varying contracts.

So what can we learn from this ruling?

When looking to vary a contract, if it is a written contract, it is important to check if there is a variation clause within the contract itself. If there is a variation clause, it is advisable to follow the procedure set out within. Often the contract will require variations to be written and signed by both parties.

Please contact Neil O’Callaghan or Holly Baker if you would like to discuss the matters raised in this article or any aspect of Commercial Litigation generally.