Oral variation of a contract containing a 'No Oral Modification' clause (Rock Advertising)
Northgate Office Space Ltd licensed serviced offices in England to Quill Design Ltd for two years at £5,000 a month. Clause 11 of the signed written licence states: "This licence may only be varied in writing signed by both parties." When Quill fell into arrears, Northgate's credit manager agreed with Quill's director in a phone call to accept £3,000 a month for six months, with the shortfall spread over the rest of the term. Nothing was put in writing. Northgate's director has now refused to honour the arrangement and claims the full contractual rent. Assume no argument based on estoppel arises.
Which of the following best describes the effect of the telephone agreement?
Choose one answer to see the reasoning.
Worked answer
Correct answer C: It is invalid, because clause 11 is effective and the variation was not made in writing signed by both parties.
THE RULE TO REMEMBER
A No Oral Modification clause is effective: a variation not made in the form the contract requires is invalid, subject only to a possible estoppel.
Oral variation of a contract containing a 'No Oral Modification' clause (Rock Advertising)
In Rock Advertising Ltd v MWB Business Exchange Centres Ltd the Supreme Court held that a No Oral Modification clause is legally effective. Lord Sumption said that what the parties to such a clause have agreed is not that oral variations are forbidden, but that they will be invalid. The mere fact of agreeing an oral variation is not a contravention of the clause but the very situation to which it applies, and it is not difficult to record a variation in writing. The court held that the oral variation in that case was invalid for want of the writing and signatures the licence required. Here clause 11 requires any variation to be in writing signed by both parties. The telephone agreement was neither, so it is invalid and the original rent remains due. The question excludes estoppel, which the court left open.
Why A is wrong: The Supreme Court rejected the view that parties cannot bind themselves as to the form of future variations.
Why B is wrong: The court held that agreeing an oral variation does not by itself show an intention to dispense with the clause.
Why D is wrong: The variation fails for want of the required form; the Supreme Court found it unnecessary to decide the consideration point.
Why E is wrong: Whether there was consideration is irrelevant where the variation is invalid for non-compliance with the clause.
A little more practice done.
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