Oral modifications to written agreements

On 12 August 2011, Rock Advertising entered into a contractual agreement with MWB Business Exchange Centres Ltd to occupy office space at Marble Arch Tower in London for a fixed term of 12 months commencing on 1 November 2011. The rent was £3,500 per month for the first three months and £4,333.34 per month for the rest of the term. The agreement included the following clause:

"This Licence sets out all of the terms as agreed between MWB and Licensee. No other representations or terms shall apply or form part of this Licence. All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect."

This type of clause is called a "No Oral Modification" clause and effectively means that no variation of the agreement can be made unless it is in writing and signed by both parties.

By February 2012, Rock Advertising had accumulated arrears of their rent amounting to more than £12,000 and proposed to repay the debt over the remainder of the term of the tenancy. There is then a dispute as to whether this revised schedule was accepted by MWB. MWB denied that they accepted the proposal and locked Rock Advertising out of their office in March 2012.

Rock Advertising contended that MWB had accepted the proposed repayment terms and so had varied the agreement. MWB denied that they had agreed to the repayment plan and further argued that even if the variation had been accepted, no variation would be accepted unless it was inwriting and signed by both parties due to the operation of the 'No Oral Modification' clause.

The Central London County Court initially agreed with MWB and found that the variation was ineffective because it was not in writing or signed by the parties.

The Court of Appeal found in favour of Rock Advertising and found that the agreement to vary the repayments amounted to an agreement to dispense with the "No Oral Modification" clause.

The Supreme Court has now determined this matter in the case of Rock Advertising Limited v MWB Business Exchange Centres Limited. It is extremely rare that a question of contractual law finds itself before the Supreme Court these days as the law is largely so well settled in this area.

The Supreme Court found in favour of MWB and that the oral variation was not effective due to the "No Oral Modification" clause not being complied with.

How is this related to employment law? Many employment contracts contain "No Oral Modification" clauses and so it is important that any changes to the terms and conditions are written down, otherwise they may not be binding.

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