Rock Advertising Limited v MWB Business Exchange Centres Limited

A contractual No Oral Modification clause is legally effective. A purported variation which fails to satisfy prescribed writing and signature requirements has no contractual force. The parties’ mere oral agreement on changed substantive terms does not imply that they also dispensed with the clause.

Estoppel may prevent reliance on such a clause, but only within limits preserving contractual certainty. At minimum, there must be unequivocal words or conduct representing that the informal variation is valid, plus something beyond the informal promise itself.

Where that ground disposes of an appeal, the court need not decide whether practical benefits amount to consideration for accepting less or later payment.

MWB licensed serviced office premises to Rock Advertising. Clause 7.6 required every variation of the licence to be recorded in writing and signed on behalf of both parties. After Rock accumulated substantial arrears, its director and MWB’s credit controller discussed a revised payment schedule by telephone. The trial judge found that they had orally agreed the schedule and that the credit controller had ostensible authority.

The Central London County Court nevertheless held the variation ineffective because it did not comply with clause 7.6. The Court of Appeal, [2016] EWCA Civ 553; [2017] QB 604, held that the oral variation also dispensed with the clause and overturned that decision.

The Supreme Court had to decide whether a No Oral Modification clause was legally effective and, if necessary, whether practical advantages supplied consideration for an agreement accepting less money or payment at a later date.

1. Appeal allowed unanimously; the order of Judge Moloney QC restored. Lord Sumption, with whom Lady Hale, Lord Wilson and Lord Lloyd-Jones agreed, held that clause 7.6 deprived the alleged oral variation of legal effect. Lord Briggs agreed with the disposition on a narrower analysis.

2. A contractual provision requiring specified formalities for a variation is legally effective according to its terms. Enforcing such a clause respects party autonomy because parties may bind themselves as to the form of future variations. The clause serves legitimate commercial purposes: it protects written agreements against informal undermining, reduces disputes about the existence and terms of variations, and assists businesses in controlling authority to vary contracts.

   The analogy with entire agreement clauses supported this conclusion. Such clauses are applied according to their construction and may deprive an alleged collateral agreement of effect where it would modify the written contract. The contrary approach in Brikom Investments Ltd v Carr [1979] QB 467 could not be supported beyond the possible operation of estoppel.

3. The parties’ mere oral agreement upon different substantive terms does not imply an agreement to dispense with the formalities clause. The natural inference is that they overlooked the clause or knowingly risked invalidity. The oral payment agreement was therefore invalid for want of the writing and signatures required by clause 7.6.

4. Estoppel remains a safeguard against injustice, but its scope must preserve the contractual certainty for which the parties stipulated. At minimum, there must be unequivocal words or conduct representing that the variation is valid despite its informality, together with something beyond the informal promise itself. Rock’s minimal steps did not satisfy those requirements, consistently with Actionstrength Ltd v International Glass Engineering In Gl En SpA [2003] 2 AC 541.

5. The validity point made it unnecessary and undesirable to decide consideration. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 treated an expected commercial advantage as good consideration, but this was in tension with Foakes v Beer (1884) 9 App Cas 605. Although the latter decision was probably ripe for re-examination, any overruling or substantial modification should occur before an enlarged panel in a case where the point was necessary to the decision.

6. Lord Briggs would have held that parties may expressly, or by strictly necessary implication, agree orally to remove or suspend a No Oral Modification clause. He nevertheless agreed that an oral agreement on substantive terms does not, without more, imply the clause’s removal. No such implication was necessary on the facts.

1. United Kingdom Supreme Court: By [2018] UKSC 24, unanimously allowed MWB’s appeal and restored the order of Judge Moloney QC. The court’s controlling reasons upheld the No Oral Modification clause.

2. Court of Appeal: By [2016] EWCA Civ 553; [2017] QB 604, overturned the County Court. It held that the oral payment agreement also dispensed with the contractual requirement for written and signed variations.

3. Central London County Court: Judge Moloney QC found an authorised oral agreement and sufficient practical consideration, but held the variation ineffective because it did not comply with clause 7.6. MWB was consequently entitled to recover the arrears.