Natasha Partos writes on MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553

MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553

Anti-oral variation clauses.

Background

Rock Advertising occupied premises managed by the Respondent MWB. This agreement had operated for a number of years and originally related to a relatively small office space. In 2011 Rock entered into a 12 month lease with MWB to commence on 1^st November 2011 for larger more expensive premises. Rock agreed to pay a lease and charges of £3,500 for the first three months and then £4,433.34 for the remainder of the term. However, Rock was unable to maintain the payments and by February 2012 had incurred arrears of £12,000. Consequently, on 30^th March 2012 MWB exercised its rights under the licence agreement to exclude Rock from the premises and to give notice to terminate the agreement from 4^th May 2012.

Thereafter, MWB issued proceedings again Rock for licence fees, charges and damages. Rock disputed the claim and made a counter-claim for losses and damages arising out of it’s exclusion from the premises.

Rock relied on an oral agreement made by MWB’s credit controller, Miss Evans and Rock’s managing director, Mr Idenhen on 27^th February 2012. Rock claimed that it has been agreed that Rock could make reduced payments to MWB from February 2012 to October 2012 and then that it would increase the payments to ensure that all of its arrears were paid by the end of the year.

In response, MWB denied that an oral agreement had been reached on 27^th February 2012.  Secondly it claimed that even if there had there been an oral variation it was not enforceable because it lacked consideration and finally, MWB relied upon Clause 7.6 of the original written agreement between the parties which stated;

‘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 licence must be agreed, set out in writing and signed on behalf of both parties before they take effect’.

At first instance the Judge accepted that there had been an oral agreement for which Rock had provided good consideration but that Clause 7.6 precluded an oral negotiation of the terms of the original agreement. The Judge did not accept that that MWB had been estopped from relying on the original written agreement by accepting a payment from Rock in February 2012.

On 9^th March 2016 Court of Appeal were asked to consider three questions,

1. Firstly, whether clause 7.6 precluded any variation of the agreement other than one in writing in accordance with its terms,
2. Secondly, whether Rock provided any good consideration for the oral variation,  and
3. Finally, whether the Judge ought to have held that MWB was estopped from enforcing its rights under the original agreement.

Kitchin LJ reserved his judgment in this case until the court had received the decision of Globe Motors Inc and Ors v TRW Lucas Varity Electric Steering Ltd and anor [2016]EWCA Civ 396.

In Global Motors  the Court received full arguments and made obiter comments on the status of anti-oral variation clauses and the inconsistent decisions of United Banks Ltd v Asif and anor (unreported 2002)  and World Online Telecom v I –way Ltd [2002]EWCA Civ 413. Providing the lead judgment Beaston LJ obiter concluded that he;

‘preferred the approach in the World Online Telecom case which recognised that in principle a contract containing a clause that any variation of it be in writing can be varied by an oral agreement’.

Underhill LJ went on to say that where there was a factual dispute as to the existence or terms of an oral variation, the party seeking to rely on informally agreed terms may face difficulties which may ‘be significantly greater if they have agreed to a provision requiring formal variation’.

This Judgment

The Court of Appeal accepted and adopted the obiter comments in Global Motors. Kitchin LJ endorsed the general principles in Alfred C Beatty v Guggenheim Exploration Company and Others (1919) 225 NY 380 that;

‘Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. The prohibition of oral waiver, may itself be waived….’

Therefore in this case Clause 7.6 did not preclude Rock and MWB from orally varying the original agreement. Furthermore, the Court accepted Rock’s contention that good consideration had been provided for the oral variation and the appeal was allowed.

Comment

Kitchin LJ has confirmed that anti – oral variation clauses are not precluded from being orally reviewed and revised.  Therefore, in practice this calls into question the effectiveness of incorporating anti-oral variation clauses into contracts at all. However, Underhill LJ’s guidance in Global Motors is pertinent. If there is a factual dispute between the parties as to the existence or terms of an oral variation of an agreement, the existence of an anti-oral variation clause may be evidentially material.

Anti- oral variation clause or no anti- oral variation clause, the advice to clients remains the same, when negotiating contracts, endeavour to get any variations to an agreement in writing.