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Read with care!

Written contracts often contain a clause to the effect that the contract cannot subsequently be varied orally and any variation must be in writing signed by both parties (known commonly as a ‘No Oral Modification’ (a ‘NOM’)). Will a NOM be upheld by the courts?  There has been some uncertainty but in Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24, Lord Sumption, with whom the majority of the Supreme Court agreed, held “In my opinion the law should and does give effect to a contractural provision requiring specified formalities to be observed for a variation.”

In Great Dunmow Estates Ltd v Crest Operations Ltd [2019] EWCA Civ 1683, a contract for the sale of land contained a very specific NOM clause requiring any amendment to be in writing recorded in a letter or memorandum signed by both parties and their solicitors referring to the said clause.  The sale price was to be agreed by the parties after the grant of a planning permission and the removal of certain registered restrictions from the title.  Both requirements were met but the parties could not agree upon a purchase price, the ascertainment of which was subject to a complicated formula including whether the valuation date was to be a defined ‘Challenge Expiry Date’ (‘CED’) or, if later, the date of valuation.

The question of valuation was referred to an Expert, Mr Stephen Downham, in accordance with the terms of the contract.  He required, inter alia, that the parties’ expert valuers should prepare an agreed statement of facts.  This they did and in it, agreed the valuation date should be the date the Expert issued his determination.  Both valuers set about preparing their expert reports on that basis.

Mr Downham found the contract gave rise to various legal issues and, with the parties’ consent, appointed Mr Timothy Morshead QC to advise.  Although not instructed to do so, Mr Morshead advised that in his view the valuation date was not the date of the Expert’s determination but was in fact the CED.  Mr Downham adopted the advice.  Great Dunmow objected and sought a court declaration on the matter.  The judge said that on the true construction of the contract the valuation date was the CED but that the agreement in the statement of facts was contractual and bound Mr Downham.  The Court of Appeal did not agree:  Mr Downham was to determine the sale price in accordance with the contract and the parties had not varied its terms in accordance with the NOM.  So, read a contract with care before reaching any agreement varying its terms.

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