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Rock Advertising Ltd v MWB Business Exchange Centres Ltd

United Kingdom Supreme Court
May 16, 2018
Smart Summary (Beta)

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

Precedent Rule or Principle Cited For Application by the Court
Beatty v Guggenheim Exploration Co (1919) 225 NY 380 Traditional U.S. view that parties can dispense with a NOM clause orally. Cited to illustrate the contrary approach rejected by the Supreme Court.
Westchester Fire Insurance Co v Earle 33 Mich 143 Support for Beatty approach. Referenced within quotation only; no detailed application.
Liebe v Molloy (1906) 4 CLR 347 Australian authority favouring oral waiver of formal requirements. Used as comparative authority, not followed.
Commonwealth v Crothall Hospital Services (Aust) Ltd (1981) 54 FLR 439 Same principle as Liebe. Cited for comparative purposes.
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 Australian support for oral variation despite NOM. Referenced; not applied.
Shelanu Inc v Print Three Franchising Corpn (2003) 226 DLR (4th) 577 Canadian decision following Beatty reasoning. Cited as comparative law.
Colautti Construction Ltd v City of Ottawa (1984) 9 DLR (4th) 265 Canadian support for oral variation. Cited only.
United Bank Ltd v Asif (CA, 11 Feb 2000) English authority suggesting NOM clauses are effective. Shown as early English view supporting Appellant.
World Online Telecom Ltd v I-Way Ltd [2002] EWCA Civ 413 Indicated law on NOM clauses unsettled. Cited as part of historical development.
Energy Venture Partners Ltd v Malabu Oil & Gas Ltd [2013] EWHC 2118 (Comm) Judicial inclination that NOM clauses ineffective. Contrasted with the Supreme Court’s conclusion.
Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] 1 CLC 712 Obiter view that NOM clauses ineffective. Not followed.
Inntrepreneur Pub Co (GL) v East Crown Ltd [2000] 2 Lloyd’s Rep 611 Effect of entire-agreement clauses. Analogy used to support enforcement of agreed formalities.
Brikom Investments Ltd v Carr [1979] QB 467 Lord Denning’s dictum discounting entire-agreement clauses. Discussed and distinguished.
J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078 Estoppel in face of written terms. Noted as different context.
Ryanair Ltd v SR Technics Ireland Ltd [2007] EWHC 3089 (QB) Treatment of entire-agreement clauses. Cited briefly.
Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2007] EWCA Civ 622 Entire-agreement clause does not bar separate collateral contract. Used to contrast situations.
North Eastern Properties Ltd v Coleman [2010] 1 WLR 2715 Court will enforce entire-agreement clause according to its terms. Supports enforcement of NOM clauses.
McGrath v Shah (1989) 57 P & CR 452 Entire-agreement clause preventing avoidance under statute. Cited as example of courts enforcing formalities.
Deepak Fertilisers v ICI Chemicals & Polymers Ltd [1998] 2 Lloyd’s Rep 139; [1999] 1 Lloyd’s Rep 387 Entire-agreement clause applied by construction. Referenced for analogy.
Matchbet Ltd v Openbet Retail Ltd [2013] EWHC 3067 (Ch) Routine application of entire-agreement clauses. Cited as practice.
Mileform Ltd v Interserve Security Ltd [2013] EWHC 3386 (QB) Same as above. Referenced.
Moran Yacht & Ship Inc v Pisarev [2016] 1 Lloyd’s Rep 625 (CA) Reaffirming entire-agreement clauses. Cited.
First Tower Trustees Ltd v CDS (Superstores International) Ltd [2017] 4 WLR 73 Entire-agreement clause interpreted. Referenced.
Adibe v National Westminster Bank Plc [2017] EWHC 1655 (Ch) Further example of enforcement. Cited.
Triple Point Technology Inc v PTT Public Co Ltd [2017] EWHC 2178 (TCC) Same context. Referenced.
ZCCM Investments Holdings Plc v Konkola Copper Mines Plc [2017] EWHC 3288 (Comm) Application of entire-agreement clause. Cited.
Actionstrength Ltd v International Glass Engineering SpA [2003] 2 AC 541 Estoppel requires unequivocal representation. Used to define limits of estoppel safeguard.
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 “Practical benefit” can be consideration. Discussed but issue ultimately left undecided.
Foakes v Beer (1884) 9 App Cas 605 Part-payment of debt not good consideration. Identified as authority possibly requiring re-examination.
In re Selectmove Ltd [1995] 1 WLR 474 Declined to follow Williams v Roffey on debt-payment variations. Cited in discussion on consideration.
Cohen v Nessdale Ltd [1982] 2 All ER 97 “Subject to contract” negotiations create no binding contract until formalised. Used by Judge Briggs as analogy for NOM clauses.
Sherbrooke v Dipple (1980) 41 P & CR 173 Confirms necessity of express abandonment of “subject to contract”. Referenced in analogy.
Tevanon v Norman Brett (Builders) Ltd (1972) 223 EG 1945 Dicta on “subject to contract” principle. Cited within analogy discussion.

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.