At first sight, the message of the Supreme Court's recent judgment in Rock Advertising v MWB seems simple: if you want to vary your contract, make sure you get it in writing. But in attempting to create greater certainty in this area, the Supreme Court may have created a new set of problems - particularly for businesses wishing to amend large numbers of contracts at the same time.
What happened in Rock v MWB?
Rock Advertising, which was in financial difficulties, had a licence from MWB to use some serviced office space. It alleged that MWB had orally agreed to accept payment of arrears of licence fees in instalments. The Court of Appeal ruled that there had been an effective variation, despite the presence of a clause in the licence saying that all variations had to be in writing, signed by both parties.
Its reasoning was that English contract law does not generally impose restrictions on the manner in which parties can make contracts (except in relation to deeds, guarantees, contracts relating to interests in land etc). Provided the court was satisfied that the parties genuinely intended to vary the contract, they would be taken to have agreed to dispense with any formality requirements.
What did the Supreme Court decide?
The Supreme Court ruled that the oral variation was ineffective because of the presence of the "no oral modification" clause. It made it clear that where the contract says that variations must be dealt with in a particular way – as most contracts do – then a non-compliant variation will generally be invalid. The one exception to this is where it would be "unconscionable" for one party to deny the effectiveness of the variation based on estoppel – which is discussed further below.