Posted: Tuesday, 7 June 2016 @ 10:18
Many written contracts contain a clause stating that only the written terms will apply and that they can only be varied by agreement in writing.
So what happens when the written terms do not reflect what has happened during the performance of the contract? Is it possible that terms could have been varied by verbal agreement or conduct without any confirmation in writing?
Often this situation only comes to light when a dispute has arisen and each side examines what the written terms of the contract actually say. Obviously the party who will benefit by a written restriction on oral variation will argue that the strict terms of the contract apply. So is all lost for the other party?
In a decision in April of this year in Globe Motors v TRW Lucas Varity Electric Steering Limited the Court of Appeal decided that no matter what the written terms of the contract state, the parties have freedom of contract to agree what they want. This includes changes to an existing written contract, even if the contract requires a written variation and the variation is in fact oral.
But of course it will be much harder to prove that an oral agreement was reached. Firstly it will have to be proved what precisely was agreed, secondly that the parties intended that the oral agreement should alter their legal relations, and thirdly there may be an issue concerning the authority of those who were involved in the oral variation.
It is still worth having a clause in a contract restricting variations to written agreement signed off, as this will make it much more difficult for an oral variation to succeed, but with clear evidence it is possible to overcome this restriction. If there is an oral variation then it would be wise to document such an agreement even if it is not signed off by the other side.
Blog by Nigel Musgrove
Nigel has been providing dispute resolution advice as a solicitor for over 35 years. As well as advising SMEs and business owners on disputes he also offers a specialist licensing law service. View profile
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