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Can you vary a contract verbally?

In Globe Motors, Inc and Others v TRW Lucas Varity Electric Steering Limited and another [2016] EWCA Civ 396 the Court of Appeal held that parties are free to vary the terms of their contract verbally, or by conduct, despite the parties having previously agreed that any future variations of the contract must be in writing.

Although the Court of Appeal did not formally have to decide on the point, all three judges gave their considered views in light of the conflicting authorities on this issue.

In summary:

  1. The governing principle underpinning the comments is that of party autonomy. Parties have freedom to agree whatever terms they choose to undertake, and can do so in writing, verbally or by conduct. Parties can agree not to vary their contract unless it’s in writing, but parties are free to change their minds and if both parties subsequently agree to the variation verbally, then the variation will be effective. A “variation in writing only” clause will not stop this. 
  1. There are no statutory or common law restrictions that prevent verbal variations in these circumstances.
  1. The Court of Appeal rejected an argument that if a variation on spoken word or conduct were to be allowed, despite the existence of a “variation in writing only” clause, this would result in parties making casual and unfounded allegations of variation. The Court, however, recognised this potential difficulty and said that it would likely require “strong evidence” before finding there has been a verbal agreement to vary the terms of the contract.

Consequently, the value of including a non-verbal variation clause has not been undermined by this significant judgment. It is still prudent for parties to include a non-verbal variation clause in their contract and comply with such specific contractual requirements to avoid any dispute. If variations are made and agreed verbally, then steps should be taken to document that variation. Speak to one our team on  0113 220 6282 for further information. 

About the Author

Annie Hui-Gillen

Associate

Annie is an Associate in the Commercial litigation department specialising in all types of commercial…

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