The UK Supreme Court in a recent decision has settled the debate on the effectiveness of No Oral Modification (NOM) contract clauses.
These clauses are very common in commercial agreements as parties seek to minimise risk by ensuring that variations of rights or waivers weren’t triggered conversationally. Until now, their effectiveness however was always the subject of debate.
In Rock Advertising Limited v MWB Business Exchange Centres Limited  UKSC 24, the Court ruled that the law does and should give effect to a contractual provision requiring specified formalities to be observed for the variation of a contract.
Lord Sumption opined that there is no conceptual inconsistency between a general rule allowing contracts to be made informally and a specific rule requiring a variation of that contract to be in writing.
Rock entered into an agreement with MWB for the licensing of serviced office space for a term of 12 months, for a monthly licence fee of £3,500.00. The agreement provided that all variations must be agreed, set out in writing and signed on behalf of both parties before taking effect. Rock ran into arrears of the licence fee and proposed a revised schedule of payments to MWB. The parties had discussions surrounding the proposal which MWB eventually rejected.
MWB proceeded to lock Rock out of the premises for failure to pay the arrears and instituted legal action. Rock counterclaimed for damages for wrongful exclusion from the premises contending MWB agreed to vary the licence agreement in accordance with the revised payment schedule. The Court held that the oral variation agreed by the parties was invalid for want of writing and signature as prescribed by the licence agreement.
The Court pointed out that NOM clauses tend to contractual certainty and are supported by legitimate commercial reasons such as preventing attempts to undermine written agreements by informal means.