07 November 2018

No Oral Modification Clauses can no longer be ignored

A recent Supreme Court decision has given guidance as to the use of No Oral Modification clauses in a contract. Below, we explore the details of the case.

Rock Advertising Ltd v MWB Business Exchange Centres [2018] UKSC 24 (“Rock v MWB”)

In this recent Supreme Court case, the court reversed its previous decision and confirmed that a “No Oral Modification” clause in a contract was legally effective.

Most construction contracts contain these clauses, so we all need to ensure that any variations agreed post contract are signed off as required by the contract.

What happened?

  • A licence agreement was entered in to between the parties which contained a No Oral Modification (NOM) clause stating that any variations must be “agreed, set out in writing and signed on behalf of both parties before they take effect.”
  • A subsequent oral agreement varied payments due from Rock to MWB.
  • A dispute arose as to whether there had been such an agreement.
  • The Court of Appeal determined (in favour of Rock) that there had been an oral agreement which not only varied the terms of the licence, but also dispensed with the No Oral Modification clause.
  • NMBL appealed this decision to the Supreme Court.

The decision

The Supreme Court allowed the appeal in favour of MWB. The basis of the decision was as follows:-

  • That it would give effect to the contractual provisions requiring specific formalities for any variation, as to do otherwise would override the parties’ express intentions.
  • The purpose of a NOM clause was to prevent informal variation agreements – thus providing certainty and avoiding disputes. Contract law should not override such legitimate reasons.

Conclusion

Rock v MWB confirms that No Oral Modification clauses cannot be ignored or overlooked - as is usually the case in many agreements. Any terms in a freely agreed contract must reign supreme. This will ensure certainty and clarity in any agreement.

Where variations are agreed verbally to contracts with a NOM clause, the parties should ensure the agreement is put in writing and the NOM clause complied with, otherwise there is no variation.

For more information, or advice on Construction contracts, contact a member of our Construction team.