Globe Motors Inc v TRW Lucas Variety Electric Steering Ltd
Contracts often provide a clause that the only way to vary a contract is in writing, and some even go so far as to say that any verbal variation between the parties will be void. The parties to a contract are often happy to have such a clause as naturally a written variation to a contract provides far greater certainty than a verbal variation ever could.
However, things of course do change and it might be that both parties later agree to vary a contract verbally. Should they wish to do so, are they both still bound by the original anti-oral variation clause and therefore must they vary the clause in writing instead?
There have previously been two conflicting authorities as to the effectiveness of such anti-oral variation clauses and there has been some debate about the prevailing view of the courts.
However in the case of Globe Motors the Court of Appeal indicated that it was not bound by the two earlier decisions and that its view was that even where a contract provided that there was to be no variation except in writing, a verbal variation would nevertheless still be effective.
Consequently parties can verbally agree to vary a term in a contract and such variations will be effective and binding – even if the contract says otherwise.
The court's comments on anti-oral variation clauses may be decisive in future cases where this point is central to the issues. This decision reasserts the principle of freedom of contract and provides a clarification that has been surprisingly lacking in this area of contractual interpretation.
So even if an employer and employee agree in a written employment contract that variations to the contract can only be made in writing, this authority now provides that such a clause may well be redundant as the parties can ultimately agree to discount this clause and verbally vary the contract anyway.
However, watch this space as it is still possible that there could yet be further debate about this issue as the comments in this ruling were obiter and did not go to the heart of the court’s decision.
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