MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24 is a landmark Supreme Court decision addressing the enforceability of “No Oral Modification” (NOM) clauses in contracts. The case holds significant importance not only for commercial property agreements but for contract law in general, particularly concerning how and whether contracts can be varied informally when a contractual clause expressly forbids oral modifications. The judgment clarified longstanding uncertainties about party autonomy, the sanctity of written contract terms, and the limits of informal agreements.
Facts of MWB Business Exchange Centres Ltd v Rock Advertising Ltd
In MWB Business Exchange Centres Ltd v Rock Advertising Ltd, MWB Business Exchange Centres Ltd (“MWB”), a company operating managed office spaces, entered into a licence agreement with Rock Advertising Ltd (“Rock Advertising”), allowing the latter to occupy certain business premises. The contract contained a clear No Oral Modification (NOM) clause which stated that any variations to the licence agreement must be in writing, signed by both parties, and executed before the variations could take effect.
Rock Advertising fell behind on payments and accrued arrears under the licence. During this period of financial difficulty, Rock Advertising claimed that it entered into an oral agreement with MWB’s credit controller over the telephone. The oral agreement purportedly revised the payment schedule to allow arrears to be cleared by instalments, with Rock Advertising paying a reduced amount initially and deferring some payments to later dates. On the same day as the oral agreement, Rock Advertising paid £3,500 in accordance with the new schedule.
MWB later denied the existence of this oral variation and took steps to terminate the licence agreement, seeking to recover arrears and damages for breach of contract. Rock Advertising counterclaimed, alleging wrongful exclusion from the premises and arguing that the contract had been validly varied orally despite the NOM clause.
Issues
The Supreme Court in MWB Business Exchange Centres Ltd v Rock Advertising Ltd considered the following critical issues:
- Are No Oral Modification clauses binding and enforceable?
- Can parties validly vary a contract orally despite such a clause?
- Was there valid consideration for the purported oral variation?
- Could promissory estoppel prevent enforcement of the NOM clause where one party relied on an oral variation?
Lower Courts’ Decisions in MWB Business Exchange Centres Ltd v Rock Advertising Ltd
Before reaching the Supreme Court, the case was heard by the Court of Appeal, which ruled in favour of Rock Advertising. The Court of Appeal held that the NOM clause was not binding, reasoning that the principle of freedom of contract meant that parties should be free to vary their contracts by any means, including orally. The court also held that Rock Advertising’s payments under the revised schedule conferred a practical benefit on MWB, which amounted to good consideration sufficient to support the contract variation, applying the doctrine from Williams v Roffey Bros [1990].
The Court of Appeal acknowledged that promissory estoppel did not apply as Rock Advertising had not suffered any detriment and MWB had given reasonable notice of its intention to enforce the original contract terms. However, the Court’s endorsement of the practical benefit doctrine in the context of promises to accept less was a significant point of debate.
MWB Business Exchange Centres Ltd v Rock Advertising Ltd Judgment
The Supreme Court, by a majority, overruled the Court of Appeal’s decision in a judgment delivered on 17 May 2018. The Court firmly upheld the enforceability of the NOM clause and held that the oral variation was invalid because it did not comply with the contractual formalities requiring written and signed variations.
Key Principles Established
Enforceability of NOM Clauses
The Supreme Court affirmed that parties to a contract are entitled to agree on the formalities required to vary their agreement. A No Oral Modification clause is valid and enforceable in English contract law, and courts should uphold such clauses in the absence of overriding public policy concerns. The Court rejected the argument that it was conceptually impossible to contract out of oral variations, highlighting international conventions such as the Vienna Convention and the UNIDROIT Principles, which also recognise the validity of such clauses.
Freedom of Contract and Certainty
The judgment emphasised that the law respects the parties’ autonomy to regulate their legal relations, including how and when contracts may be varied. The Court recognised the commercial rationale for NOM clauses: they prevent informal oral discussions from undermining the certainty of written contracts, avoid disputes over alleged oral variations, and help companies comply with internal authorisation rules concerning contract variations.
No Waiver of NOM Clause Without Clear Agreement
The Court observed that simply making an oral agreement to vary the contract does not, by itself, amount to waiving or abandoning the NOM clause. To set aside the clause, there must be an express or necessarily implied agreement between the parties. In MWB Business Exchange Centres Ltd v Rock Advertising Ltd, the oral agreement did not mention or purport to waive the NOM clause, so the clause remained binding.
Consideration Not Decided
Since the Court found the NOM clause binding, it was unnecessary to decide whether Rock Advertising’s payments conferred valid consideration for the variation. However, Lord Sumption noted obiter that the practical benefit doctrine, as applied in Williams v Roffey Bros, had not been extended to promises to accept less payment and suggested that the older rule from Foakes v Beer might require reconsideration by a larger panel.
Role of Promissory Estoppel
The Supreme Court acknowledged that promissory estoppel might provide protection against injustice where a party relies on an oral variation, but stressed that estoppel is a limited exception and requires clear and unequivocal conduct amounting to a representation that the variation is valid despite informality. In the instant case, Rock Advertising had not met this threshold.
Conclusion
In conclusion, MWB Business Exchange Centres Ltd v Rock Advertising Ltd confirms that No Oral Modification clauses are generally enforceable, and parties must comply with contractual formalities when varying agreements. While parties retain autonomy, the Supreme Court emphasises adherence to clear contractual language and procedures to ensure certainty and avoid disputes. The case acts as a pivotal reference point on contract variation, balancing commercial flexibility with the need for legal certainty.