Rock Advertising Ltd v MWB Business Exchange Centres Ltd

Factual and Procedural Background

Company A operates serviced office space in The City. On 12 August 2011 it granted Company B a 12-month licence to occupy offices, subject to a clause (“clause 7.6”) that: “All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.”

By 27 February 2012 Company B had accrued arrears of more than £12,000. Its Director proposed, during a telephone call with an Employee of Company A, a revised payment schedule that deferred part of the February and March fees and spread the arrears over the remaining term. The Employee treated this as a proposal only; her superior rejected it. On 30 March 2012 Company A excluded Company B from the premises and terminated the licence. Company A sued for the arrears; Company B counter-claimed for wrongful exclusion, asserting that an oral variation had been agreed.

Judge Moloney QC in the Central London County Court found factually that an oral agreement had been made and that the Employee had ostensible authority, but held the variation ineffective because clause 7.6 required written, signed variation. The Court of Appeal reversed, holding that (i) consideration existed and (ii) the oral variation implicitly dispensed with clause 7.6. Company A appealed to the Supreme Court.

Legal Issues Presented

1. Whether a No Oral Modification (“NOM”) clause that requires variations to be in signed writing is legally effective.
2. If the NOM clause is ineffective, whether an agreement to accept deferred or reduced payments is supported by consideration.

Arguments of the Parties

Appellant’s Arguments (Company A)

• Clause 7.6 is contractually binding; any variation not in signed writing is void.
• Upholding NOM clauses promotes certainty, prevents abusive defences, and facilitates corporate control of contractual changes.
• No estoppel arose because Company B took only minimal steps in reliance on the alleged variation.

Respondent’s Arguments (Company B)

• The oral agreement on 27 February 2012 validly varied the licence and, by necessary implication, also dispensed with clause 7.6.
• The variation was supported by consideration because it enhanced the likelihood of eventual payment and reduced the risk of vacant premises.

Table of Precedents Cited

Court's Reasoning and Analysis

Majority opinion (Judge Sumption, joined by Judge Hale, Judge Wilson and Judge Lloyd-Jones)

• At common law contracts generally need no formalities, but parties may nonetheless agree to prescribe formalities for future variations.
• Enforcing a NOM clause respects, rather than restricts, party autonomy; parties voluntarily limit how they will alter their bargain.
• Commercial reasons for NOM clauses—certainty, avoidance of misunderstandings, and control of internal authority—are legitimate and not contrary to public policy.
• Conceptual arguments that an informal variation necessarily destroys the NOM clause are unsound; the clause renders such a variation invalid, not “forbidden.”
• International instruments (CISG, UNIDROIT Principles) show no incompatibility between informal contract formation and enforceable NOM clauses.
• Risks of injustice are mitigated by doctrines of estoppel, but estoppel requires unequivocal representation and reliance, which were absent here.
• Accordingly, the oral variation found by the trial judge was invalid for want of the prescribed signed writing.
• Because that conclusion disposes of the case, the Court refrains from analysing whether consideration existed, noting the tension between Williams v Roffey and Foakes v Beer.

Concurring opinion (Judge Briggs)

• Agrees in the result but adopts narrower reasoning: a NOM clause remains binding unless the parties expressly, or by necessary implication, agree to remove it.
• An oral variation that is silent about the NOM clause does not, without more, impliedly dispense with it.
• Draws analogy with “subject to contract” negotiations: consensus reached under that umbrella is not binding until formalities are met.
• Predicts that, in practice, urgent cases will be addressed either by written variation or by estoppel; otherwise the NOM clause will control.
• Considers this incremental approach closer to the common-law consensus and adequate to secure commercial certainty.

Holding and Implications

HELD: The appeal is ALLOWED; the order of Judge Moloney is restored.

Immediate Effect: Company A may recover the arrears; Company B’s counter-claim fails because the alleged oral variation is unenforceable.

Broader Implications: The Supreme Court confirms that No Oral Modification clauses are generally effective under English law. Parties must comply with agreed formalities or risk invalidity; estoppel remains a limited safeguard. The question of whether “practical benefit” constitutes consideration in part-payment cases was left open, so existing authority (Foakes v Beer) remains undisturbed.