The Significance of the UKC’s Decision in Rock Advertising Ltd Vs.

MWB Business

Exchange Centers Ltd

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Introduction

The recent United Kingdom Supreme Court’s determination in Rock Advertising Ltd

Versus MWB Business Exchange Centers Ltd (2018) was much anticipated. Present litigation

barely raises new vital issues in matters relating to the law of contract. However, this case

handled two. Furthermore, the previous Court of Appeal decision had left the statute detailing

non-oral modification clauses' effect in a bad state. In this case, both the Supreme Court and the

Court of Appeal were accorded a rare opportunity to deliberate on several aspects touching on

Contract Law. In a case that affirmed the validity of contracts, increased our knowledge of

consideration, and improved the more nuanced estoppel doctrine, both courts ultimately led us to

a position that accurately reflects the reality of a contract. This paper will now discuss in depth

the significance of the UK Supreme Court’s decision in Rock Advertising Ltd Versus MWB

Business Exchange Centers Ltd (2018).

The Supreme Court termed its decision in this matter as “truly fundamental... in contract

law”. The decision provides much-required clarity regarding the effectiveness of NOM clauses.

Lord Sumption's decision, which was supported by Lady Hale, Lord Lloyd, and Lord Wilson,

found that the correct interpretation of party independence is that parties might consent to

obligate their future conduct. Once parties have reached an agreement on their future conduct,

that consensus sets confines of party independence. The result is that, should there be changes to

the contract, the changes should be done in writing; variations of the contract orally will be

deemed invalid. However, parties are still allowed to change a No Oral Modification (NOM)

clause in the form specified for changes by the contract, that is, writing.
 The Supreme Court ruled in favor of MWB Business Exchange Centers Ltd on the

grounds that parties may consent to bind their future conduct with the no oral modification

(NOM) clauses, thereby ensuring business commitment between the parties. It is noteworthy that

the case history shows the different views that can be taken in this matter. In the county court, it

was determined that though there was an oral agreement between the sole director of Rock and

the credit controller at MWB to proceed with the revised payment schedule, it would not be

effective to change the existing license as it was not done in writing and signed by the concerned

parties as mandated by the NOM clause. This was despite the fact that the credit controller had

explicit authority to come up with such a decision. 1

Considering the proliferation of no oral modification clauses in a wide range of

agreements, this was a significant judgment. It is normal for parties to discuss schedules of

payment or to change flight return conditions on redistribution. Previously, if consent was

reached to change the terms already written, it would be considered effective. Without any

written evidence, this could lead to arguments over whether or not the agreement was attained

(as it was the scenario with Rock Advertising Ltd versus MWB Business Exchange Centers Ltd)

or what exact terms. Therefore, the Supreme Court placed business commitment above the

party's freedom to “unmake” an agreement. It is not possible to eliminate all conflicts in which

the parties have reached an oral agreement, and one party intends to break away from the

contract, but depending on arguments like estoppel will undoubtedly make it more difficult for

one party to impose any oral agreement of this nature. The Supreme Court's decision underlines

1
Tattersall, Luke. "No Oral Modification Clauses: Contractual Freedom under English and New York Law."  J. Int'l

& Comp. L. 6 (2019): 117.

the importance of documenting all agreements to change the prevailing terms as swiftly as

possible.

This case offers an assurance to the contracting parties that the NOM clauses will come

into force as drafted and stresses the essence of formalities in the ‘boilerplate’ contract language.

In practice, the verdict makes it extremely difficult for a party to come up with a verbal contract

variation with a NOM clause. Though an alternative interpretation of the law by Lord Briggs is

of interest, it is a minority verdict and addresses the unlikely event where parties consider and

then make an express verbal amendment to the NOM clause instead of simply complying with

the appropriate clause. The ‘clean break’ recommended by Lord Sumption would be the current

interpretation of the act on NOM clauses. 2

In practice, this implies that parties must be aware of the true terms of the contract as to

any event of parties consenting (verbally) to breach the contractual terms on a daily basis,

commercial operations unaware of the complexities of existing terms of the contract are now

unlikely to be effective. With the exception of brief comments on Estoppel, Lord Sumption did

not consider in depth the possibility of distinguishing a contract with a NOM clause through a

course that deals differently from verbal variations. This matter does not seem to be relevant to

the facts of the case but will certainly be significant in practice. If there is a NOM clause in a

contract, the court follows the logic of the prior judgment and considers such differences in

conduct ineffective (without a precise written adjustment). In some cases, it is an embarrassment

2
Pathak, Akhileshwar. "Sanctity of Oral Agreements: MWB Business Exchange Centres Ltd v Rock Advertising

Ltd." (2019).
that the verdict did not address this matter as in practice, which is as common as the problem of

oral alteration.

The decision reached by the UK Supreme Court held that upholding the no oral

modification clauses not only honors party independence but also, and more importantly,

enhances business certainty. More often, the resilience of common law has been seen as a mixed

blessing in the world of business. Therefore, supporting clauses of this kind would protect

business contracts from inadvertent contract variations. As a matter of fact, parties should be

compelled to adhere to the variation they have spelled out for themselves. If this variance is so

significant for both parties, then it would certainly not be difficult for them to institute the

necessary measures, for instance, putting the changes in writing and appending signatures on it. 3

Again, the primary function of incorporating no oral modification clauses is to avert the

dispute that ensued. From an economic point of view, it makes no sense for the parties to get

involved in long-term conflicts over if an oral variation of their agreement is valid when both

parties have previously consented that such oral variations simply have no effect whatsoever.

Putting into practice NOM clauses will save reasonable time and costs for both parties and the

courts as well. By upholding provisions of this nature, trivial claims can be evaded without the

court “threshing into the underground” to conduct rigorous interrogations into conflicting

evidence provided by the parties.

3
Burt, George. "No oral modification clauses under English law: contract law." Without Prejudice 18, no. 7 (2018):

12-13.
 Furthermore, as a matter of practice, large companies may have a legal interest in

maintaining a properly written record of all of their contracts and contractual variations. The

obligations of formalities, therefore, would avert the unfortunate situation of an employee

verbally agreeing to a suggestion to change the contract in the absence of such authority. It

should be noted, however, that this reason is most effective where both have equal bargaining

powers. A different scenario, g. a business-customer relationship or standard contract form

where the no oral modification clause may be a common word in a small axis may demand a

different treatment of no oral modification clauses. The UK Supreme Court's decision, despite

the imbalance in bargaining power this reason is still essential unless the incorporation of the

NOM clause is tantamount to inconsistent conduct on the side of the business entity.

Conclusion

By way of contract, parties are at will to enforce obligations on themselves. Therefore,

once a no oral modification (NOM) clause is incorporated into an agreement (contract), both

parties must abide by the legal requirements set forth by the clause. Parties that prefer greater

flexibility in changing their contracts should have agreed not to incorporate the oral modification

clause in the first place. The UK Supreme Court’s decision on imposing NOM clauses should be

welcomed. The Rock Advertising Ltd Versus MWB Business Exchange Centers Ltd judgment

will inspire contracting parties to make informed decisions as to whether the incorporation of this

kind of clause best serves their business interests while at the same time maintaining party

independence.
 Bibliography

Burt, George. "No oral modification clauses under English law: contract law." Without

Prejudice 18, no. 7 (2018): 12-13.

Davies, Paul S. "Varying Contracts in the Supreme Court." Cambridge Law Journal 77, no. 3

(2018): 464-467.

Pathak, Akhileshwar. "Sanctity of Oral Agreements: MWB Business Exchange Centres Ltd v

Rock Advertising Ltd." (2019).

Roberts, Marcus. "Foakes v Beer: Bloodied, Bowed, but Still Binding Authority?" King's Law

Journal 29, no. 3 (2018): 344-353.

Tattersall, Luke. "No Oral Modification Clauses: Contractual Freedom under English and New

York Law." J. Int'l & Comp. L. 6 (2019): 117.

Taylor, Joshua. "Concerning the Enforceability of No Oral Modification Clauses: Rock

Advertising Ltd v MWB Business Exchange Centres Ltd." Business Law

International 20, no. 1 (2019): 81-86.