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Want To Alter Your Contract? Check It First

Want To Alter Your Contract? Check It First

We all know how common it is for contracts to be signed and never looked at again. The contract is then varied or amended as the project proceeds, perhaps orally or rather informally by an exchange of emails. All is well until, at a later date, there is a dispute about whether an agreement to vary it had actually been made. Or perhaps the dispute is about what the detailed terms of that agreement to vary were. Meanwhile, those in Head Office are not happy that their carefully negotiated contract terms are being altered by others without their knowledge. That is why it is common to find a clause in a contract which says that all variations or amendments to the contract must follow a set procedure. It is usually called a “Variation”, “No Variation” or “No Oral Modification” clause.

The level of formality required by a variation clause depends on the type of contract. It might say that any later variations must be in writing and signed. It might be more detailed saying, for example, that variations must be signed by an individual at a specified level such as a director. In the past, it has been difficult to enforce these clauses. No longer.

The Supreme Court has issued a judgment which makes it clear that these clauses will be legally effective. This is helpful if you want to be in control of the process by which a contract is varied. Such control can be an effective way of managing risk on a project. On the other hand, the downside is that you later find that you have acted, and probably incurred cost, in the belief that a contract had been varied, but that variation is subsequently challenged because the precise terms of a variation clause were not complied with. All is not lost in that situation, as it may still be possible to argue that the company seeking to rely on the strict written terms of the variation clause is, by virtue of its conduct, personally barred from doing so. However, the success of such an argument can not be guaranteed since it depends so much on the facts and circumstances of each individual case. The key message is that these problems can be avoided in the first place by checking - and following - the terms of the contract before you decide to alter it.

Rock Advertising Ltd v MWB Business Exchange Centres Ltd  Supreme Court 16 May 2018

Lynda Ross
Professional Support Lawyer

Burness admin