In a review of a recent judgment of the United Kingdom Supreme Court, which overturned longstanding precedent on No Oral Modification clauses, partner Ben Hobden and associate Spencer Vickers of Conyers Dill & Pearman in the Cayman Islands find the decision will provide welcome certainty on contracts
NON-LAWYERS may be surprised to know that the omnipotence paradox is a commonly considered topic by law students. The paradox is expressed in the question: “Can an omnipotent being create a rock so heavy it could not lift it?” In law school, the question instead is: “Can two parties agree a term so enduring that they could not subsequently agree to deviate from that term?”
The United Kingdom’s Supreme Court judgment of 16 May 2018, which will be of guidance to Cayman Islands courts, in the aptly named Rock Advertising v MWB Business Exchange Centres provides an answer to the question. The court was asked to consider whether a written contract which required modifications to be made in writing and signed by the parties was effective (referred to as the ‘No Oral Modification’ clause (NOM clause) in the judgment). A five-justice panel comprising Lady Hale as president, alongside Lords Wilson, Sumption, Lloyd-Jones and Briggs, sitting in the Supreme Court, upheld the effectiveness of NOM clauses, answering the paradox with a resounding and unanimous ‘yes’.
As a result, parties varying their contractual arrangements should be careful to ensure that any subsequent agreement/variation meets any requirements of formality which were previously agreed. A failure to comply with an earlier agreed protocol in relation to variations may prevent a party from relying on the varied terms.
This article was first published in Commercial Dispute Resolution.