Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396 (Globe Motors).

An anti-oral variation clause is a part of a contract which specifically states that any amendments or changes to the contract must be done in writing. Strict application of this clause provides a great degree of certainty for the parties and avoids disputes between parties. It also negates the need for expensive and lengthy litigation.

A potential nightmare for drafters and parties to a contract has been roused following the Court of Appeals judgment in the case of Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396 (Globe Motors).

The Court found that in the absence of a common law restriction:

The parties have freedom to agree whatever terms they choose to undertake. They can do so in a document, by word of mouth, or by conduct.  The consequence in this context is that…the fact that the parties contract contains a clause such as Article 6.3 (which was an anti-oral variation clause) it does not prevent them from later making a new contact varying the contract by either oral agreement or conduct’

Given that the courts comments were obiter, the efficacy of such clauses remains uncertain. Nevertheless, even though a court would be likely to require “strong evidence” before finding that there has been an oral variation of a contract containing such a clause; such statements should ring alarm bells for those who have working contractual relationships.

Beware! Even with an anti-oral variation clause, your conduct or representations may have changed the terms of the contract.

Please contact us for further information.

10th June 2016

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