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Is there any point in using a Variations Clause?

July 2016

The Court of Appeal has issued another decision confirming the limited effectiveness of contractual clauses which attempt to prohibit any variations to a contract that are not made in writing and agreed by both parties.

In MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553 the Court of Appeal held that a landlord who orally agreed to vary a tenancy agreement in order to give the tenant longer to pay rent obtained a practical benefit by keeping the tenant in the property as opposed to leaving it vacant. This practical benefit, and the fact that the landlord had behaved as if the variation was binding (without being under any economic duress), meant that the variation was held indeed binding despite a clause in the contract requiring any variations to be agreed in writing.

The MWB v Rock decision adds further clarity to a number of earlier decisions on this subject, confirming that if the parties to a contract say they want to change the contract and then act as if it has been changed then a valid variation will generally be upheld irrespective of whether they have complied with an expressed variations clause.

A variations clause still can have practical value in encouraging the parties to follow an agreed procedure if they do want to vary the contract. It will also help a party argue against purported variations where no consideration has passed and that have not been executed by deed. However it is important for those who are managing a contractual relationship after its commencement to bear in mind that failure to comply with such clauses can still give rise to a binding variation to the contract, and often does so in practice.

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