Most construction contracts contain a clause that specifies all variations to the contract must be in writing. Indeed, there is nothing unusual in construction contracts having such clauses; they are to be found in commercial contracts of all descriptions. And with good reason _ whilst variation-in-writing clauses can be onerous they provide certainty and security of contract to both parties.
It is against this backdrop the Court of Appeal was asked in the case of Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396 to consider whether, despite a contract specifying that all variations must be in writing, a subsequent oral variation was valid.
Although the case was able to be decided on a different point, all three judges commented in detail on the validity of variation-in-writing clauses and were unanimous that such clauses were unenforceable.
The court commented that the overriding principle of freedom of contract means that, "parties are therefore free to include terms regulating the manner in which the contract can be varied, but just as they can create obligations at will, so also can they discharge or vary them".
It was not a decision they made without careful consideration of the consequences either, stating that, "there might well be practical benefits in being able to restrict the manner or form in which an agreement can be varied, but [...] I do not think that there is a principled basis on which that can be achieved".
What this means is that even where parties have a variation-in-writing clause in place there is nothing to prevent them subsequently varying the contract either orally or by way of a deemed variation based on their conduct.
So, is this the death knell to variation-in-writing clauses? Despite this decision, in most cases we will continue to recommend to employers and contractors alike that variation-in-writing clauses are included in contracts. These clauses will continue to provide clarity to both parties and their omission would likely provide fertile ground for future disputes. Anyone hoping to dispense with their provisions should also think carefully _ without confirmation in writing there are likely to be significant evidential burdens to overcome for a party seeking to later rely on an oral or deemed variation.
Nonetheless, the impact of the court's decision is that variation-in-writing clauses may now be best viewed as a best practice guide, albeit one to be ignored at your peril.
Ref: Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396
