Clifford Darton and Sally Blackmore win an “exceptional” appeal in the Supreme Court which raised fundamental issues of contract law

“Modern litigation rarely raises truly fundamental issues in the law of contract.  This appeal is exceptional.  It raises two of them”: MWB Business Exchange Centres v Rock Advertising Limited [2018] UKSC 24, [1] (Lord Sumption).

The first issue was whether a no oral modification clause in a contract was legally effective; the second whether an agreement whose sole effect is to vary a contract to pay money by substituting an obligation to pay less or the same money is supported by consideration.

Ultimately, the Court dealt only with the first issue, and found for the Appellant – represented by Clifford and Sally.

The argument on behalf of the Appellant focused on the lack of certainty and the resulting difficulties (practical, legal and in the context of litigation) that would inevitably arise – in contexts ranging from ‘big business’ to social housing – were no oral modification clauses to be denied their teeth.  It is open to parties to vary a contract containing a no oral modification clause, went the argument; they must simply do so in accordance with the clause.  Against this, the Respondent focused on the importance of party autonomy, which had been central to the decision of the Court of Appeal and to the Court of Appeal decision in Globe Motors Inc & Ors v TRW Lucas Varity Electric Steering Ltd & Anor [2016] EWCA Civ 396.

The judgment of Lord Sumption, with which Lady Hale and Lords Lloyd-Jones and Wilson agreed, is very much commercial.  The arguments against no oral modification clauses being given effect are, as he says, “entirely conceptual” and the idea that a no oral modification clause should not be applied in the interests of “party autonomy” – see Lord Kitchin in the Court of Appeal at [34] – a fallacy.  “The real offence against party autonomy is the suggestion that they cannot bind themselves as to the form of any variation, even if that is what they have agreed.” (Lord Sumption at [11]).

Lord Briggs agreed with the result, but approached the question more cautiously and with greater (although still limited) scope for a role for equity.  In his opinion, it is possible for parties orally to agree to vary, or even abandon, a no oral modification clause, but they must turn their minds properly to doing so; a decision to vary, to exclude, the no oral modification clause will not automatically be implied where the parties have ostensibly agreed to vary a different part of the contract.  His judgment will, doubtless, be fixed upon by parties seeking to squeeze around a no oral modification clause; with what success remains to be seen.

In that context, in this case, any decision on the consideration point would have been relegated to obiter and, whilst the difficult question posed was, as Lord Sumption said, probably ripe for re-examination, this appeal was not the place to do it.

Clifford and Sally were instructed by Samantha Dawkins of Edward Harte LLP.