If parties enter into a written contract providing that any alteration to the contract must be “set out in writing and signed on behalf of both parties before they take effect”, can the contract still be varied orally?
The Court of Appeal has considered the question twice this year: first on an obiter basis in Globe Motors Inc and ors v TRW Lucas Varity Electric Steering Limited and anor , and secondly on a binding basis in MWB Business Exchange Centres Ltd v Rock Advertising Ltd  EWCA Civ 553.
In MWB the Defendant (“D”) agreed to pay a licence fee for occupying premises pursuant to a written agreement containing a clause such as that quoted above. D fell into arrears; its representative “agreed” orally with a representative of C that D’s payments would be re-scheduled. C’s representative subsequently had second thoughts and sought to rely (inter alia) on the anti-oral variation provision when D tried to hold C to the variation. (On a separate note, the case is also of interest for its discussion of consideration and the practical benefit doctrine deriving from Williams v Roffey Bros & Nicholls (Contractors) Ltd  1 QB 1.)
The case law in this area has historically been inconsistent with two C.A. cases pointing in opposite directions: United Bank Ltd v Asif (11th February 2000, unreported) suggested such clauses worked successfully to preclude oral variations, yet World Online Telecom  EWCA Civ 413 suggested the contrary. In Globe the C.A. came down in favour of World Online: party autonomy dictated that parties should be open to orally vary their agreement if they wished.
In MWB Kitchen LJ (with whom Arden and McCombe LJs agreed) applied Globe. Whilst clauses of this nature may be of some value (e.g. evidentially or to suggest the counter-party did not intend to be bound by mere oral discussions) they do not operate to contractually preclude oral variations.
Whilst it may be said that the decision is a blow for certainty, particularly for larger organisations which often face concerns about alleged oral variations, it accords with principle and freedom of contract. In the words of Cardozo J from nearly 100 years ago in the New York C.A. case of Alfred C Beatty (1919) 225 NY 380: “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….What is excluded by one act, is restored by another. You may put it out by the back door, it is back through the window. Whenever two men contract, no limitation self-imposed can destroy their power to contract again….”
Richard Hayes / 14th Jul 2016
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