The Court of Appeal has again – this time in the case of
MWB Business Exchange Centres Limited –v- Rock Advertising
Limited, confirmed that parties will not be bound by a clause in a
contract purporting to provide that oral variations will be
In this case the defendant, Rock Advertising, occupied serviced
offices maintained by the claimant, MWB. Rock Advertising
fell into arrears and claimed that it had reached an oral agreement
with the defendant to re-schedule the outstanding licence fees.
The licence agreement contained the following clause:
"This licence sets out all of the terms as agreed between
MWB and the licensee. No other representations or terms shall
apply or form part of this licence. All variations to this
license must be agreed, set out in writing and signed on behalf of
both parties before they take effect".
Such clauses are inserted in agreements for good reason: it
makes sense to ensure that the parties (a) know what they have to
do to vary the agreement and (b) have to do so in writing so that
there is no dispute about oral discussions at a later stage.
There has for some years been uncertainty about whether such
"no oral variation clauses" are binding. Indeed in
2000 and 2002 there were two conflicting decisions in the Court of
Appeal on this. However earlier this year, in the case of
Globe Motors –v- Lucas, the Court of Appeal reviewed the
authorities and decided that such clauses were not binding on the
parties so that even if a clause contains a contract in these terms
it is still possible for the parties to vary it by oral
discussions. It is therefore not a great surprise that in
this latest case handed down on 21 June, the Court of Appeal have
come to the conclusion that the Globe Motors case has settled the
law on this. A party seeking to rely on such an oral
variation will still have to prove it, and this is likely to cause
uncertainty in many cases. It is also important to note that
some contracts, for example many relating to interests in land,
cannot be varied orally in this way because they are subject to
more stringent formality requirements.
One additional interesting feature of the MWB case is the
argument before the Court on the issue of
"consideration". Wherever there is a contract, or a variation of a
contract, contract law requires there to be
"consideration" : in this case something of value
provided by Rock Advertising in return for MWB's agreement to
re-schedule the debt. In practice all that Rock Advertising
were agreeing to do was to pay money that was acknowledged to be
already due under the licence agreement. However the Court
found that even though this was the case, there was still some
additional benefit to MWB in this deal: they would recover some of
the arrears immediately and would have a hope of recovering the
balance in due course. Rock would also remain a licensee and
continue to operate the property so that MWB did not suffer ongoing
losses. To lawyers brought up on traditional notions of
"consideration" this seems very flimsy indeed since it
really is difficult to see how it goes beyond what Rock Advertising
were already obliged to do. However it is a timely reminder
of the fact that judges in commercial matters are now prepared to
find that there has been "consideration" on very limited
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The English Commercial Court has published two recent judgments of Mr Justice Popplewell in a single anonymised case concerning the removal of two arbitrators under section 24(1)(d)(i) of the Arbitration Act 1996.
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