Boilerplate clauses are standardised clauses which can be found in most commercial contracts. Such clauses are not usually negotiated and tend to be standard across various different agreements. Boilerplate clauses do not refer to the commercial terms of the agreement but instead they determine the operation of the contract. These clauses can be overlooked but it is important for a businessperson regularly entering into contracts to be able to understand the meaning of boilerplate clauses to be able to determine their suitability.
Here, Greenaway Scott takes a look at a recent case law update on the ‘no variation’ clause.
Commercial contracts will often include a “No Variation” clause amongst the Boilerplate clauses. Often this sets out that a variation to a contract will only be valid if the variation is in writing and signed by the parties.
So what’s the problem?
Whilst this may seem straightforward, until recently the position was unclear. Principles of contract law hold that there is no requirement for a contract to be formed in writing for it to be valid. Furthermore, the dynamic nature of business means that elements of an agreement can change quickly and the parties may therefore wish to make changes to a contract without excessive formality.
It was therefore open to question as to whether a contractual variation made orally between the parties would be enforceable, or, whether the no variation clause rendered such a variation unenforceable. This uncertainty was not ideal for business owners as it left open the possibility that oral variations to a written contract could be made, subsequently leading to costly and potentially lengthy disputes over enforceability with each party to the contract unclear of their contractual obligations.
However, The Supreme Court in Rock Advertising Limited v MWB Business Exchange Centres Limited have now provided some clarity on this issue.
The court found that where there is a No Variation clause stipulating that any variation must be in writing, any variation made that is not in accordance with its terms will be invalid. As the highest court in the UK this decision will be reinforced by all lower courts moving forwards.
What does this mean for you
As a businessperson entering into contracts it is vital to read and understand the boilerplate clauses including a No Variation clause in order to be certain of how to make legally enforceable variations to your agreement if required. Just because the boilerplate clauses are not normally negotiated it does not mean that they can’t be! Think of what the most suitable provisions are for the agreement in question and draft the clause accordingly. A no variation clause which states that any variation must be in writing and signed by each of the parties offers some certainty but sacrifices flexibility. If you are involved in a highly dynamic business which requires more flexibility over certainty then it might be worth exploring other drafting options.
The information contained in this article is for information purposes only and is not intended to constitute legal advice. If you require further information our commercial team would be more than happy to assist you. Please contact us at [email protected] or call us on 02920 095500 to speak to one of our team.