In the case of Rock Advertising Ltd v MWB Business Exchange Centres Ltd, the Supreme Court of the United Kingdom addressed the issue of the enforceability of an oral modification clause in a commercial contract. The dispute revolved around a license agreement for office space between Rock Advertising Ltd (Rock) and MWB Business Exchange Centres Ltd (MWB).
Rock, a marketing company, entered into a license agreement with MWB for the use of office space in central London. The agreement included a clause stipulating that any modifications or variations must be in writing and signed by both parties (an oral modification clause). Rock faced financial difficulties and fell behind on payments. Subsequently, Rock proposed a revised payment schedule during a phone conversation with a representative of MWB, but no formal written agreement was reached.
MWB, relying on the oral modification clause, later asserted that the revised payment arrangement was invalid and insisted on the original terms. This led to Rock's eviction from the premises, and MWB pursued the outstanding payments through legal action.
The case went through several levels of the judicial system. The trial court initially ruled in favor of MWB, holding that the oral modification was unenforceable due to the presence of the written agreement clause. The Court of Appeal upheld this decision. However, the matter was ultimately appealed to the Supreme Court.
The Supreme Court, in a unanimous decision, overturned the lower court rulings. Lord Sumption, delivering the judgment, emphasized the principle of freedom of contract and rejected the idea that parties could not agree to vary the contract orally, even if there was a written agreement requiring modifications to be in writing. The court held that an "anti-oral variation" clause (no oral modification clause) could itself be varied orally or by conduct if the parties demonstrated a clear intention to do so.
Significance: The Rock Advertising v MWB decision clarified the enforceability of oral modifications in the presence of "no oral modification" clauses. It affirmed the importance of party autonomy and the ability of contracting parties to vary their agreements, even if the contract includes a provision requiring modifications to be in writing. The judgment reinforced the principle that parties can, by mutual consent, agree to modify their contractual obligations orally or through conduct, even if a written agreement suggests otherwise.