Contract – Variation – Anti-oral variation clause – Appellant occupying managed office premises under licence from respondent – Parties entering into new licence agreement for occupation of larger premises at increased licence fee – Respondent terminating licence agreement on ground of arrears and claiming unpaid licence fee and charges – Appellant relying on alleged oral agreement to vary payments – Whether reliance on such agreement precluded by clause in licence agreement stating that all variations to be made in writing – Whether consideration given for oral agreement – Appeal allowed
The appellant, a company that provided marketing services, occupied as licensee a small suite of offices in a managed office building run by the respondent. In August 2011, with a view to expanding its business, it entered into a new licence agreement with the respondent in respect of larger premises, for a term of 12 months from November 2011, and for an increased licence fee of £3,500 per month for the first three months and £4,433.34 per month thereafter, excluding VAT. The agreement further provided in clause 7.6: “This licence sets out all of the terms as agreed between [the respondent] and the licensee. No other representations or terms shall apply or form part of this licence. All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.”
The appellant’s business did not develop as it had hoped and, by early 2012, the appellant was more than £12,000 in arrears with licence fees and other charges. The respondent exercised its right under the licence agreement to lock the appellant out of the premises and thereafter gave notice to terminate the agreement.
The respondent brought proceedings against the appellant to recover the arrears. The appellant disputed the claim and counterclaimed for damages for wrongful exclusion from the premises. It relied on an oral agreement said to have been made in February 2012 to reschedule the licence fee payments due under the agreement; it claimed that the effect of that agreement was that, over the period from February to October 2012, it was to pay a lesser sum for the first few months but was thereafter to pay more, with the result that the arrears would be cleared by the end of the year. It asserted that, as a result of its payment of the first agreed instalment in the sum of £3,500, and the respondent’s acceptance of the same, the respondent was estopped from denying the existence of the oral agreement.
The judge found that the oral agreement had been made as claimed and that the appellant’s agreement to pay in accordance with the revised schedule amounted to good consideration for it. However, he held that the agreement was not enforceable by reason of clause 7.6 of the licence agreement. He further held that the respondent was not bound by any estoppel since the payment of £3,500 by the appellant did not amount to relevant detrimental reliance, being a sum which the appellant was already obliged to pay. The appellant appealed.
Held: The appeal was allowed.
(1) There had for some time been a considerable degree of uncertainty as to whether an agreement in writing that contained an anti-oral variation clause such as clause 7.6 of the licence agreement could be varied other than in accordance with the terms of that clause. That uncertainty flowed in part from two inconsistent decisions of the Court of Appeal, both appeals from decisions about summary judgment. In the first, the court held that, in the light of such a clause, no oral variation of the written terms of the agreement could have any legal effect: see United Bank Ltd v Asif unreported 11 February 2000. In the second, apparently decided without reference to United Bank, the court considered that the law on the issue was sufficiently unsettled to render it unsuitable for summary determination, but expressed the view that the parties had made their own law by contracting, and could in principle unmake or remake it: see I-Way Ltd v World Online Telecom UK Ltd [2002] EWCA Civ 413 considered.
The latter view was now supported by a further decision of the Court of Appeal, albeit that its reasoning on the point was not essential to its decision in the case: see Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396. The court in that case expressed the view that, as a matter of general principle, parties had freedom to agree whatever terms they chose to undertake, and could do so in a document, by word of mouth or by conduct, with the result that an anti-oral variation clause in a contract did not prevent the parties from later making a new contract varying the original contract by oral agreement or by conduct. That proposition was based on the principle of freedom of contract, under which parties were free to include terms regulating the manner in which the contract could be varied, but, likewise, could also discharge or vary them, at any rate where to do so would not affect the rights of third parties: see Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd [2016] EWCA Civ 396.
Given that the relevant principles, the material policy considerations, the earlier authorities and the issue of precedent had been considered in depth and with the benefit of very full argument in Globe Motors, it would require a powerful reason for the court to come to a different conclusion, or adopt a different approach, in the instant case. There was no such reason. The Globe Motors decision was correct for the reasons given; in particular, the powerful consideration of party autonomy. It followed that clause 7.6 of the licence agreement in the instant case did not preclude any variation of the original agreement other than one in writing and in accordance with its terms.
(2) The judge had been entitled to find that an oral variation agreement had been made as alleged and that the appellant had given consideration for it. The judge had found that the oral variation agreement would have a number of beneficial consequences for the respondent: first, that the respondent would recover some of the arrears immediately and would have some hope of recovering them all in due course; and, second and more importantly, the appellant would remain a licensee and continue to occupy the property with the result that it would not be left standing empty for some time at further loss to the respondent. There was no suggestion that the respondent had at any time been operating under any kind of duress. There was a commercial advantage to both parties in reaching an agreement if that could be achieved. In those circumstances, the appellant’s immediate payment of £3,500 and its agreement to perform its obligations under the revised payment schedule conferred a practical benefit on the respondent which amounted to good consideration, so rendering the oral variation agreement enforceable: Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 applied; Foakes v Beer (1884) 9 App Cas 605 and Re Selectmove Ltd [1995] 1 WLR 474 distinguished.
(3) Per curiam: In the light of the above, it was not necessary to decide whether, had the oral variation agreement not been enforceable, the respondent would nonetheless have been estopped from enforcing its rights under the original agreement. However, the better view was that no estoppel arose. The broad principle was that, if one party to a contract made a promise to the other that its legal rights under the contract would not be enforced or would be suspended, and the other party in some way relied on that promise, whether by altering its position or in any other way, then the party who might otherwise have enforced those rights would not be permitted to do so where it would be inequitable having regard to all of the circumstances. In the instant case, the appellant did not suffer any detriment by its payment of £3,500 in accordance with the revised schedule since that was a sum that it was in any event bound to pay. Shortly thereafter, the respondent had sought to re-impose its legal rights under the original agreement and had given the appellant reasonable notice that was henceforth required to comply with the terms of the original agreement. Further, the appellant could be restored to the position that it was in before the further agreement was made. It could not be said to have suffered any prejudice by relying on that agreement and, in those circumstances, the respondent would not have been precluded by the doctrine of promissory estoppel from taking the action that it did. The doctrines of waiver or proprietary estoppel added nothing to the case on promissory estoppel on the facts of the case.
Henry Hendron (instructed by direct access) appeared for the appellant; Clifford Darton (instructed by Edward Harte LLP, of Brighton) appeared for the respondent.
Sally Dobson, barrister
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