Oral variations

Rock Advertising v MWB Business Exchanges (SC) [2018]

We reported on the Court of Appeal decision back in our September 2016 Update. The Court of Appeal had overturned the original decision of the County Court. Now the Supreme Court has in turn overruled the Court of Appeal, effectively giving legal effect to contractual clauses which prohibit oral variations to a commercial contract having effect.


MWB is a provider of serviced offices. Their contract with Rock contained a clause in the following terms:-

"All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect".

Rock had accumulated arrears of fees and it proposed a revised schedule of payments. It was argued that an agreement had been reached during a telephone conversation between Rock’s sole director and MWB’s credit controller that part of the upcoming payments would be deferred and the arrears would be spread over the remainder of the licence term. Rock contended that MWB had orally agreed to vary the contract. MWB disagreed. It locked Rock out of the premises for failure to pay the arrears and terminated the contract. MWB sued for the arrears; Rock counterclaimed for damages for wrongful exclusion from the property.

The county court judge found that an oral agreement had been made to vary the contract in accordance with the revised schedule and that the variation was supported by consideration or benefit to MWB because it brought practical advantages to MWB. However, he found that the variation was ineffective because it had not been in writing, as the clause required.

Rock successfully appealed to the Court of Appeal which held that the oral agreement to vary the payments also amounted to an agreement to dispense with the no oral variation clause, meaning that MWB was bound by the variation. MWB appealed to the Supreme Court.


The Supreme Court unanimously allowed the appeal and refused to allow the no oral variation clause to be ignored. Lord Sumption gave the lead judgment with which 3 law lords agreed. Lord Briggs agreed with the result but disagreed with the reasoning.

The Supreme Court held that the law gives effect to contractual provisions requiring specified formalities to be observed for a variation. Lord Sumption commented that such clauses:

These were all recognised as legitimate commercial reasons for using such clauses. The court did however acknowledge that the enforcement of such clauses carried with it the risk that a party could act on the contract as varied and then find itself unable to enforce it. The safeguard against injustice in such circumstances lays in the doctrine of ‘estoppel’. For estoppel to apply there has to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality, and something more would be required for that purpose than just the informal promise itself.

Lord Sumption supported his conclusions by drawing analogies with so called ‘entire agreement’ clauses. He argued that if entire agreement clauses can have the effect of preventing a contract variation taking effect then clauses prohibiting oral variations should also be given effect. This analogy with entire agreement clauses is questionable. Entire agreement clauses are primarily backwards looking. Clauses prohibiting oral variations are, in direct contrast, forward looking.

Lord Briggs came to the same conclusion but for different reasons. He explicitly recognised that parties to a contract can together orally agree to remove a no oral variation clause from their contract. However, an agreement to remove a no oral variation clause would not be implied where the parties agreed orally upon a variation but without saying anything about the clause. In this instance, nothing had been said about the no oral variation clause and so it remained ‘in play’. He did however leave open the possibility that a no oral variation clause could be removed either expressly or by ‘strictly necessary implication’ i.e. not necessarily in writing. However, he did stress that such a test would be narrowly applied.

One of the issues which commonly arises in relation to variations is the question of the presence or absence of consideration or value flowing from each party to the other. Unilateral promises are not typically binding as contracts. Part payment of or agreement to pay a sum that is already owed is not normally regarded as good consideration. The decision that the Court reached on the variation clause made it unnecessary for the Supreme Court to deal with the issue of consideration. The only consideration MWB could have been given for accepting a less advantageous schedule of payments was the prospect that payments were more likely to be made if they were rescheduled. This was an expectation of practical value but not an additional contractual entitlement. Practical expectations have been held not to be adequate consideration ever since the case of Foakes v Beer dating from 1884. The Supreme Court said that any decision on that point was likely to involve the re-examination of Foakes. The Supreme Court explained that this should happen before an enlarged panel of the court and in a case where the decision would be than more than ‘obiter’ i.e. a comment said in passing which is not necessary to the judgment in issue.

Points to Note:

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