Can a written contract be later amended by verbal agreement? The question is important because most business to business written contracts contain a clause that the contract or part of it can only be varied (changed) by further written agreement, and most written contracts go on to stipulate how and what form the further written agreement must take.
However those of you win business will know that the real world does not work like that. Often you change the terms of trade with your suppliers, business associates, customers, on a case-by-case basis as and when the need arises, and often do so with a simple verbal agreement. This is a case not only because this is how the real world works, but also because many people forget about the written variation clauses contained in their contracts.
But are such changes legally binding? This only becomes a relevant question if the dispute has arisen and the standard advice used to be turn to the contract to see what it says. However in April 2016 the Court of Appeal in the case Globe Motors versus TRW Lucas Varity Electric Steering Limited found that parties to a contract have freedom to agree what they want. Including changes to a current contract even if on the face of it variation requires written consent. In short an existing contract can be varied verbally.
An example of the courts trying to reflect real life which must always be applauded. However it is not the death of written variation clauses. It is still advisable to include these as having one would make it more difficult for the other party to rely on verbal variation. Naturally a lot depends on the nature of the contract itself. For example if it is a high value contract relating to a complex transaction it is still best practice and indeed common sense to require that all amendments be in writing. However if the contract relates to a non-complex transaction and is not of a particularly high value it is more likely than not that a culture will develop whereby variations tend to be verbal, which are now course legally binding.
Written by Bruno Rodrigues. If the contents of this article interested you and you wish to discuss it or any other legal matter please do not hesitate to contact us using the contact form on this webpage or using the details contained on this site.