5. It follows, that while the reasoning of the court is far from stellar, the decision is the right one. The difficulty about this is that if it is conceptually impossible, then it cannot be done, short of an overriding rule of law (presumably statutory) requiring writing as a condition of formal validity. In the Court of Appeal, Kitchin LJ observed that the most powerful consideration in favour of this view is “party autonomy”: para 34. I conclude that the oral variation which Judge Moloney found to have been agreed in the present case was invalid for the reason that he gave, namely want of the writing and signatures prescribed by clause 7.6 of the licence agreement. 17. In MWB Business Exchange Centres Ltd v Rock Advertising Ltd the Court of Appeal held that when an ongoing contract is varied so that one party's obligation to pay money is reduced, the variation is binding as long as the other party receives a practical benefit. On the facts, R had obtained a benefit and so there was consideration to support the agreement to make the bonus payments to W’. It seems likely that this fed greatly into the Court’s decision to confine Foakes as far as it did. It followed that the oral variation was valid, though only for so long as Rock continued to make the payments. The only exception was the rule that a corporation could bind itself only under seal, and what remained of that rule was abolished by the Corporate Bodies Contracts Act 1960. On the third, that MWB was not estopped from enforcing its right under the original agreement; the Court needed to consider whether it would be ‘inequitable’ to allow MWB to enforce original rights, instead of looking only at detriment. A subsequent variation meant the written clause was ineffective. First, whether an anti-oral variation clause precluded any variation of the agreement other than one in writing in accordance with its terms. On the second, that ‘practical benefit’ can amount to good consideration, even in Foakes v Beer (part-payment) situations. Judgment details. MWB obtained a practical benefit more than just part payment and a promise to pay off the debt. Again, all will depend upon the circumstances. 61. They impose no formal requirements for the validity of a commercial contract, and yet give effect to No Oral Modification clauses. As her Ladyship was at pains to point out in reference to Foakes v Beer:19 12 MWB, [48] (Kitchin LJ). Namely, that the ‘only suggested consideration [in Foakes v Beer] was the debtor’s promise to pay part of his existing debt’. It was seen to be a ‘commercial advantage’[12] by the judges to permit a practical benefit to be found in the case, that MWB would be able to recover the arrears of the debt and still have Rock as a licensee on the premises, avoiding lack of rent due to the building being empty. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum. Third, whether MWB was estopped from enforcing its rights under the original agreement. Rock Advertising claimed its exclusion was wrongful, because it had an oral agreement with MWB's credit controller to reschedule the licence fee payments to clear the arrears, and it had paid £3500 that day under it. Indeed, based on the tenor of the judgment, it seems that the Court, if faced with the facts of Foakes v Beer now, would have found that Mrs Beer obtained a ‘practical benefit’ of being able to direct that money to some other cause, whether that be buying a last-minute holiday to Aruba, or paying off her mortgage, so long as counsel argued the point. They also argued that paying under the revised schedule conferred the claimant a ‘practical benefit’ – within the meaning of Williams v Roffey Bros 2 WLR 1153 – which was good consideration to vary an existing agreement. 11. But what if the parties make a collateral agreement anyway, and it would otherwise have bound them? However, this is, it is submitted, a true reflection of what the Court in Pinnel’s case meant when it endorsed the idea that: ‘the gift of a horse, hawk, or robe, &c., in satisfaction is good, for it shall be intended that a horse, hawk, or robe, &c., might be more beneficial to the plaintiff than the money, in respect of some circumstance, or otherwise the plaintiff would not have accepted of it in satisfaction’. 15. Abstract: In MWB Business Exchange Centres Ltd v Rock Advertising Ltd the Court of Appeal held that when an ongoing contract is varied so that one party’s obligation to pay money is reduced, the variation is binding as long as the other party receives a practical benefit. Nearly all contracts bind the parties to some course of action, and to that extent restrict their autonomy. On consideration, Kitchin LJ rehearsed the rule in Pinnel’s case as affirmed in Foakes v Beer, that ‘payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the whole’. Firstly, Confirmation of the rule in Foakes v Beer, alongside Williams v Roffey, means that the question of whether a promise to perform an existing obligation owed to the promise may be good consideration is to be determined upon the arbitrary basis of the nature of the obligation in question. In Brikom Investments Ltd v Carr [1979] QB 467, 480, Lord Denning MR brushed aside an entire agreement clause, observing that “the cases are legion in which such a clause is of no effect in the face of an express promise or representation on which the other side has relied.” In fact there were at that time no cases in which the courts had declined to give effect to such clauses, and the one case which Lord Denning cited J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078) was really a case of estoppel and concerned a different sort of clause altogether. UKSC 2016/0152. Clearly, consideration would cease if a party were to stop paying. He held (para 12) that it was a sufficient reason for refusing summary judgment that “the law on the topic is not settled.” In Energy Venture Partners Ltd v Malabu Oil and Gas Ltd [2013] EWHC 2118 (Comm), para 273 Gloster LJ declined to decide the point but “incline[d] to the view” that such clauses were ineffective. The true position is that if the collateral agreement is capable of operating as an independent agreement, and is supported by its own consideration, then most standard forms of entire agreement clause will not prevent its enforcement: see Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2007] L & TR 26 (CA), [2007] EWCA Civ 622, at para 43, and North Eastern Properties Ltd v Coleman [2010] 1 WLR 2715 at paras 57 (Briggs J), 82-83 (Longmore LJ). 16 May 2018. The advantages of the common law’s flexibility about formal validity are that it enables agreements to be made quickly, informally and without the intervention of lawyers or legally drafted documents. Secondly, in circumstances where oral discussions can easily give rise to misunderstandings and crossed purposes, it avoids disputes not just about whether a variation was intended but also about its exact terms. Lady Hale, Lord Wilson, Lord Sumption, Lord Lloyd-Jones, Lord Briggs. All variations to this Licence must be agreed, set out in writing and signed on behalf of both parties before they take effect. In other words, he did not apply the requirements of Foakes v Beer to the facts at all. The corollary is that the inclusion of an anti-oral variation clause may mean that the practical ease of discharging the burden of proof is markedly increased with respect to the party seeking to establish that a variation did take place. This does not seem to me to follow. In Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, the Court of Appeal held that an expectation of commercial advantage was good consideration. Second, it serves as a reminder of the fact that when it comes to commercial matters, the courts are increasingly prepared to find ‘good consideration’. An anti-oral variation clause does not therefore prevent an oral variation. The case of MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553 was one which came on appeal from Central London County Court, regarding whether the court should allow contracting parties to vary their agreement orally; despite their agreement containing an … In MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553, Rock Advertising (‘Rock’) licensed office space from MWB. The only consideration which MWB can be said to have been given for accepting a less advantageous schedule of payments was (i) the prospect that the payments were more likely to be made if they were loaded onto the back end of the contract term, and (ii) the fact that MWB would be less likely to have the premises left vacant on its hands while it sought a new licensee. The argument is that it is conceptually impossible for the parties to agree not to vary their contract by word of mouth because any such agreement would automatically be destroyed upon their doing so. However, Rock was more likely to be able to make the payments under the licence. His Lordship held that MWB had received two such practical benefits: first, recovering some arrears immediately; and second, avoiding the property being empty. It is probably ripe for re-examination. 4 Foakes v Beer (1884) 9 App Cas 605. The problem about this was that practical expectation of benefit was the very thing which the House of Lords held not to be adequate consideration in Foakes v Beer (1884) 9 App Cas 605: see in particular p 622 per Lord Blackburn. 16. The English cases are more recent, and more equivocal. Further, Kitchin LJ rejected the estoppel argument (obiter), stressing that Rock’s paying of the £3,500 was merely paying a licence fee that was already due. Indeed, the steps he took to arrive at his conclusion of allowing the appeal three paragraphs later remain a mystery. (Williams v Roffey Bros & Nicholls Ltd [1991] 1 QB.1 [4]). It is not difficult to record a variation in writing, except perhaps in cases where the variation is so complex that no sensible businessman would do anything else. Arden LJ commenced heranalysisby referring to thegeneral principle that The court dismissed Selectmove’s appeal. MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] on whether a practical benefit is valid consideration for part-payment of a debt ; Wood v Capita Insurance Services Ltd [2017] on the rules of contract interpretation ; Rock Advertising Ltd v Business Exchange Centres Ltd [2018] and its impact on No Oral Variation clauses (NOM) They agreed that the variation was supported by consideration, but they considered that the oral agreement to revise the schedule of payments also amounted to an agreement to dispense with clause 7.6. Yet there is no mischief in No Oral Modification clauses, nor do they frustrate or contravene any policy of the law. Kitchin LJ, with respect, seems to have glossed over any distinction that exists between Foakes v Beer and Williams v Roffey. 9. There is no principled reason why the parties should not adopt the same principle by agreement. JustLaws4u 1,264 views. These widely used codes suggest that there is no conceptual inconsistency between a general rule allowing contracts to be made informally and a specific rule that effect will be given to a contract requiring writing for a variation. It remains to be seen whether the rule in Pinnel’s case will make its way up to the Supreme Court, where it might be more conclusively overruled. Thirdly, a measure of formality in recording variations makes it easier for corporations to police internal rules restricting the authority to agree them. ", Actionstrength Ltd v International Glass Engineering In Gl En SpA, Williams v Roffey Bros & Nicholls (Contractors) Ltd, https://en.wikipedia.org/w/index.php?title=Rock_Advertising_Ltd_v_MWB_Business_Exchange_Centres_Ltd&oldid=984746514, Creative Commons Attribution-ShareAlike License, This page was last edited on 21 October 2020, at 21:12. In MWB Business Exchange Centres Ltd v Rock Advertising Ltd the Court of Appeal held that when an ongoing contract is varied so that one party's obligation to pay money is reduced, the variation is binding as long as the other party receives a practical benefit. Email addresses or indeed if, this applied to the extent that the oral.. All variations to this licence sets out all the terms as agreed between MWB and [ Rock ] safeguard. ’ s arrears would have been cleared by the English cases are more recent, and that. And Rock Advertising and gave notice, as it did been found a mixed blessing by businessmen and is therefore. 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