A bleak future for variation-in-writing clauses?

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A bleak future for variation-in-writing clauses?

A clause specifying that all variations to a contract must be in writing is a common clause in commercial contracts of every description. Such clauses create certainty between the parties.

The Court of Appeal has however recently cast doubt on the effectiveness of variation-in-writing clauses in the case of Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396.

Although the case was decided on a different point, the Court of Appeal considered the validity of variation-in-writing clauses. The court commented that where a contract contained a variation-in-writing clause “an oral agreement or the conduct of the parties may give rise to a separate and independent contract.”

And what is the practical effect of this independent contract? A variation of the original contract between the parties!

Whilst it is now doubtful that the presence of a variation-in-writing clause in a contract can guarantee that variations to the contract can only be made in writing - a subsequent decision of the Court of Appeal has confirmed the comments in Globe Motors Inc - the inclusion of such a clause is in most cases still advisable. They help to ensure that any variations are documented. This provides the parties with clarity and reduces the potential for disputes about what was or wasn’t agreed to be varied. Without such a clause, and written confirmation, a party seeking to rely on an oral or deemed variation is likely to face a difficult evidential burden.

For further advice on contracts and terms and conditions, please contact a member of our Corporate & Commercial team.

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