Can I change the terms of a written contract by way of a verbal agreement?
19th July 2018 by Sam Freeman
Who doesn’t love the beginning of a relationship? You spend hours together trying to determine if the other person is suitable for you, learning about their values and you hesitantly start to talk about your brilliant future together. A business relationship is no different, although the result of this initial “courtship” is usually a written contract setting out the rights and obligations of each party rather than a wedding, mortgage or children.
As a business relationship develops however, the contract is often forgotten about, hidden away in a filing cabinet. Any changes to the original arrangement may be settled by way of a handshake or over lunch rather than by way of a written document. Why spend time and money instructing lawyers when everyone is on the same page? Agreeing changes verbally may not be an issue when things are going well between the parties, but what if (after the honeymoon phase) the relationship breaks down and one of the parties wants a divorce? Will the original written contract apply or the verbal agreement to amend it?
Whilst there has previously been some uncertainty on this point, a recent case has affirmed that where the original contract includes a clause that requires any changes to be made in writing, this will be upheld. In short, if your contract states that any changes must be agreed upon in a certain way then it would seem illogical to suggest that you did not then have to then follow this process. In the eyes of the law, a man will not always be expected to be as good as his word!
Whilst this is good news in the sense that it provides us with greater certainty over whether an agreed change will be binding or not, now would be a very good time to revisit your existing contracts and ensure that they reflect the way in which you are currently operating. Have you agreed any changes to the contract that have not been recorded in writing and signed by both parties? Has your working relationship changed without you even discussing it and your contract is out of date as a result? Even if you do not have a clause that requires changes to be set out in writing, it will be much easier to evidence the fact that changes have been agreed if you have a signed variation agreement rather than having to resort to an argument over who said what in court.
In a world already filled with administration tasks, the last thing you may want to do is to read through a legal contract. But taking the time to do so, and to update it, may be invaluable to your business.
If you would like any further information on updating your commercial contracts please contact Sam Freeman on 01202 557256 or at firstname.lastname@example.org.