• Robert Spicer

Supreme Court upholds sanctity of contract

CONTRACTS

No oral modification clause

Variation

Case Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, Supreme Court

Facts Rock entered into a licence agreement with MWB to occupy office space for a fixed term of 12 months. The agreement provided that all variations of the terms must be set out in writing (a no oral modification (NOM) clause). Rock accumulated licence fee arrears. It proposed a revised schedule of payments to MWB’s credit controller. This was worth less to MWB than the original terms. A dispute arose as to whether this arrangement had been accepted. MWB locked Rock out of the premises, terminated the licence and sued for arrears of payments. Rock counterclaimed for wrongful exclusion from the premises. At first instance the county court ruled that MWB’ claim succeeded because the oral variation did not satisfy the terms of the licence agreement. Rock appealed to the Court of Appeal which found that the oral agreement amounted to an agreement to dispense with the NOM clause. MWB appealed to the Supreme Court.

Decision 1. The appeal was allowed.

  1. The oral variation was invalid for lack of writing.

  2. Parties who agree an oral variation in spite of a NOM clause do not necessarily intend to dispense with that clause. What the parties agreed was that oral variations would be invalid.

  3. The natural inference from a failure to observe a NOM clause is not that the parties intended to dispense with it, but that they overlooked it.

  4. Party autonomy operates up to the point when the contract is made, but thereafter only to the extent that the contract allows.

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