The Terms, They are a-changing

You’ve agreed all the details of a long-term deal and confirmed that it is on your standard terms or gone to the trouble of setting the whole contract out in writing so that everyone is certain what the terms are.  The trouble is nothing ever stays the same in business and the one thing you can be virtually certain about is that the terms will change with time.  You’ve probably thought about obvious variations, such as price or changes in specification and built those into the contract, but a hundred other things can change as well, and what you don’t want is to undo all the careful original preparations by having changes made informally and then having to prove when and how they were changed and by whom.

That’s why one of the bits of standard legal boilerplate usually says that no variation to the contract is valid unless it is in writing and (often) signed by a duly authorised signatory for both parties.  But does the standard legal boilerplate hold water if the parties have clearly agreed to change the terms of the contract?  No, says the Court of Appeal in two recent cases.  If there is clear evidence, such as email exchanges or just the conduct of the parties which shows that they have agreed to alter the terms of the contract, then their agreement to alter it is valid and binding, even if the contract says the variation must be in writing.

So what about the “No Variation” clause in the boilerplate?  Delete it as pointless?  No.  There is still some value in having it there because the court also said that it does provide strong evidence that the parties did not intend to vary the terms of a contract other than in the agreed way (i.e. “in writing, signed by a duly authorised signatory.”)  Given that express intention, the party arguing that the terms were varied will need to produce convincing evidence of the details and extent of the change before the court will accept that the No Variation clause has been overridden.

Yet another lesson in the importance of contract management.  If things change, make sure you have recorded in writing (even if only in an exchange of emails) exactly what has changed and what the changes are so that there is a clear and contemporaneous record.

Disclaimer: Nothing in the Legal Insights section and this blog is intended to provide legal or other professional advice and, if readers are interested, they should consider taking separate legal or other professional advice accordingly.