Earlier this year, the Supreme Court decided in Rock Advertising Ltd v MWB Business Exchange 2018 that, where a written contract states that it can only be varied by observing specified formalities (for example by doing so in writing and signed by both parties), those formalities will – in most circumstances – need to be observed if the variation is to be effective. This decision has far-reaching consequences, because many contracts are varied informally by the parties during their life without checking the requirements, which can be fatal to enforcement if a dispute arises. There are however still some situations where the variation may be enforceable and all may not – necessarily – be lost.
Clarkslegal successfully used this decision recently to strike out an opposing party’s Defence because the oral variation to the contract raised in the Defence did not meet the formalities required by the contract. While any party seeking to vary a commercial contract must now comply with the formalities to avoid the risk of unenforceability, if you find yourself in a position where the formalities have not been complied with and the counterparty is now refusing to perform a variation, all may not – necessarily – be lost. There are still two key legal arguments that can be made to uphold an “informal” variation:
The Court will consider all evidence in deciding such arguments, including how the parties behaved after the agreed variation. Consequently, if you have suffered loss in complying with an “informal” variation and your counterparty then goes back on this, there may still be a way to enforce it, and this will depend on the full context of the variation which should be considered when seeking to do so.