BuildLaw BuildLaw: Issue 24, June 2016 | Page 32

accepted that difficulties of proof may arise whenever it is claimed that a contract has been made orally or by the conduct of the parties - the facts will need to be determined on the basis of the evidence before the court.
However, even where there is a no-variation clause, an oral variation or a variation by conduct could be effective where the evidence establishes - on the balance of probabilities - that the variation was agreed.

There were two competing Court of Appeal decisions on the issue - as a result it was entitled to decide which one to follow. They preferred the approach which recognised the principle that a contract containing a no variation clause can in fact be varied by oral agreement or by conduct.

As a result, the Judge at first instance was entitled to conclude that, on the basis of "open, obvious and consistent" dealings over a long period there was no other explanation but that the parties intended to add Globe Porto as a party to the Agreement.

Comment

TRW thought it was in contract with a substantial financially stable company. It was totally surprised to find that over many years through the conduct of its employees, and without any reference to its legal team, it had ended up in contract with a subsidiary of Globe that had a significantly weaker balance sheet.
While clauses requiring any variations to be in writing and signed by all parties do have a value - if there is clear evidence a variation has occurred and the parties have agreed to it the clause may not have the effect it was intended to have.

The Court of Appeal has confirmed the general principle of freedom of contract, but at what price to commercial certainty for contracting parties?

Author - James Gordon

James Gordon provides clear, no-nonsense advice on risk management, helping clients to avoid liabilities and disputes arising in the first place (particularly in contract termination situations) and, if they do arise, advising on the most cost-effective method of concluding them.

If a business wants to fight an issue on principle, James is an aggressive and tactically astute litigator with experience in all UK courts and ICC, LCIA, UNCITRAL and ad hoc arbitrations. He uses his considerable experience to plot a course towards a conclusion, organising those around him into a team with a clear objective. Clients will know where they are headed and what their target objective is, and will appreciate the risks and benefits of such a course.