Is it possible for a contract to be varied based on words or conduct alone?


SHORT ANSWER: Yes

LONG ANSWER:

The recent Court of Appeal case Globe Motors Inc v TRW Lucasvarity Electric Steering Ltd [2016] EWCA Civ 396 held that a contractual clause requiring variations to be in writing did not prevent a variation being agreed by other means e.g. a discussion or conduct.

Examples of this might include you, as a company, agreeing with a supplier that you will always pay them in advance or you, as an employer, regularly allowing an employee to work on different days and times to those set out in their contract of employment.

The Globe Motors case involved a supply agreement, which contained the following clause:

‘this Agreement […] is the only agreement between the parties relating to the subject matter hereof. It can only be amended by a written document which (i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both parties’.

The case was decided on another issue, but the Court made obiter (non-binding) comments on the validity of the amendment of contract clause.

The Court took the view that, in the absence of any legal authority on the matter, the parties could, effectively, override their own agreement on variations if they so wished. It noted, however, that variations of contract based on oral discussions or conduct are trickier to prove than written variations.

WHAT YOU SHOULD DO NOW:

1 Either agree all contractual variations in writing or confirm oral or conduct-based variations in writing so that there is evidence of what was agreed.

2. Be aware that seemingly innocuous discussions and behaviour could vary a contract if the other requirements for a valid contract (in particular, an intention to create legal relations and certainty of terms) are present.

If you think you might have inadvertently varied a commercial contract and need help in ‘undoing’ what you’ve done contact Greycoat Law for a free initial consultation to find out whether we can help you: 020 8989 9111 or practice.manager@greycoatlaw.co.uk


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