Can verbal agreements trump written terms?

It is quite common to have a clause in an agreement which states something along the lines that any changes to the agreement have to be in writing. So what happens if the parties agree to vary the terms verbally, and then one party insists that the variation is not effective as it is not in writing? This was the question which the Supreme Court had to consider in the case of Rock Advertising v MWB Business Exchange Centres (2018).

This was not an employment case, but the principles established by the Supreme Court will potentially apply to all agreements, including employment agreements. In this case the Appellant entered into a licence agreement with the Respondent to occupy some office space. The Appellant fell into rent arrears and claimed to have reached an agreement with the Respondent to vary the terms of the licence to defer the rent payments. The Respondent denied this, but agreed there had been some concession on its part. The Appellant argued that the terms of the licence were effectively altered by the verbal agreement.

The Supreme Court said no – the licence agreement required any variation to be in writing, and that express term had not been satisfied. Therefore any verbal agreement which may or may not have been made was not effective.

Whilst this case is clear on the principle that an oral agreement to amend the terms of a contract which expressly states that any amendment must be in writing will not be effective, it does leave open the defence of estoppel. This will occur where the party relying on the doctrine can show that they have changed their position because of the actions or representations of the other party, and that it was reasonable for them to have done so, for example by relying on a verbal assurance. However, the doctrine of estoppel is a discretionary remedy, and really only one to be used when there is no other defence. So, if you want to make amendments to a contract which says that any amendments must be in writing, make sure they are, and ideally get the other party to sign to show their acceptance.

How this case will be applied in an employment context remains to be seen. One key difference between an employment contract and a commercial contract is that there is generally an imbalance of power between the parties. It seems likely that an employee may try and argue that this case should be interpreted differently, bearing in mind that employees usually have little influence on their terms and conditions.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.