Oral Changes: Can Clients Wriggle Out of Paying?

Defining the scope of your contract is critical.

Firstly, the scope is the starting point for determining whether any goods, works and services provided are extras – if not, they should be included in the original contract price.

Secondly, the contract terms will explain if the extent of the change was permitted under the contract – if not, then there may be a separate contract for those goods, works or services [read the myths of changing the scope].

Lastly, you need to follow the mechanism in the contract to agree the new price.

Or do you?

Managing changes

A clutch of cases has reviewed whether changes to a contract which did not comply with the express change procedure – for example, at least that change should be recorded in writing – are still permitted changes to the original contract.

In Globe v Lucas the contract said it “can only be amended by a written document which (i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both Parties.” The court referred to the principle of freedom to contract and said that the clause did not prevent the parties from varying the contract (including that clause about varying the contract) orally or by their conduct.

Frankly you may as well include a requirement to have the variation documents delivered on the back of a unicorn if the parties are going to ignore the procedure and the courts are going to allow that!

In Rock v MWB the contract said “All variations to this [contract] must be agreed, set out in writing and signed on behalf of both parties before they take effect.” The Supreme Court said that the clause did prevent the parties varying the agreement by another mechanism.

They also upheld the sense that a change must meet the minimum requirements for a contract and include consideration.

What should you do?

Write sensible practical contracts, that everyone can read and follow, and use the mechanisms wherever possible.

But don’t rely on these clauses to wriggle out of paying for agreed changes!

*Cases: Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396; Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24

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