So, in your contracts or standard terms you’ve got a clause which says that any changes have to be made in writing and possibly even signed by a senior employee or director. That means you’re covered if your customer or supplier says that one of the terms was changed or varied in some way verbally, right?
Wrong, or at least, not necessarily.
The courts have looked at this issue in the past and have done so again in the case of Globe Motors Inc v TRW Lucas Variety Electric Steering Limited. So this means the position must be clearer now?
Again, wrong, or at least, not necessarily.
Basically, it can depend on the context in which the oral change was made. The party saying that there has been an oral change has to prove it with strong evidence where the agreement says this is not allowed.
There may be good reason to change a contract verbally. For example, in a long-term situation, circumstances can change along the way and you may need to be flexible. You may not want to put everything down in writing if a change needs to be dealt with urgently or in response to an unforeseen event.
But what the law says is that you should not rely on oral changes being effective on the one hand or ineffective to change the contract on the other. Everything depends on the circumstances that exist at the time. So, what can you do to protect yourself?
If you are looking to rely on a clause that any changes have to be written, you should not automatically assume that this type of clause will protect you, but it will help to have one.
Take practical steps such as making it clear to staff who are customer or supplier facing that they must be careful in saying anything that changes what your contract or terms say.
Consider internal guidance which says that all changes have to be put in writing and signed by a senior member of staff or management if that is what the contract says.
If a change must be made urgently and there is no time for formalities, at the least make it clear that any changes have to be agreed by management in writing as a minimum, even if this is only done internally. That way you minimise the risk of changes being made without management’s consent if the contractual process can’t be followed in exceptional circumstances. There should be no nasty surprises.
If you are looking to change the terms of a contract which contains one of these clauses what should you do? In an ideal world, make sure the process in the contract is followed properly. If this is not possible and you have to rely on an oral change or a change through conduct what can you do?
This situation will always be less certain. Push for the formal process to be followed but if that is not possible, make sure you explain why the procedure has not been followed, for example, through emails or notes of conversations. Any agreement to the change should also be evidenced in the same way. These steps should be taken at the time, not after the event. Keep this with the contract paperwork in a file and make sure it is not thrown away or destroyed.
These steps will not guarantee success if there is a falling out, but they will help if for some reason, the correct procedure cannot be followed. The safest option is to do what the contract says and, if you can’t, make sure you have strong evidence of the change that has been made, how it was agreed and why.
The message, then, is that you should always refer to the contract before you make changes and make sure these are made in accordance with its terms.
This post was edited by Michelle Davies. For more information, email firstname.lastname@example.org.