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Student ID: 1983751

Word count: 1170

Student ID: 1983751

Contract Law

Rock Advertising Limited v MWB Business Exchange Centres Limited [2018] UKSC 24

Total word count: 1170

Student ID: 1983751

Word count: 1170

Rock Advertising Ltd v MWB Business Exchange Centres Ltd

I shall begin my briefing report by pointing out the key issues in this case, which are consideration, variation clauses (oral variation) and estoppel.

Facts MWB operates office spaces in central London. Rock who is a marketing services provider had occupied premises managed by MWB for a number of years. On August 2011 Rock entered into an agreement with MWB for occupation of larger premises. Rock fell into arrears of licence fees and other charges and in discussion between its principal and a senior credit controller of MWB agreed on a revised payment schedule (orally). However, a senior representative of MWB rejected this proposal, evicted Rock and claimed arrears of rent along with other damages for the loss it had suffered. Rock counterclaimed for loss and damage as a result of wrongful exclusion.

The 2011 written agreement contained a "no oral modification" (NOM) clause (cl.7.6), which provided: “All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect.”

Decision and principle The court was asked to determine: 1) Whether the oral agreement for the revised payment plan varied the licence despite of the NOM clause? 2) Rock argued that by accepting £3,500 and ongoing payment, MWB was estopped from acting contrary to the oral variation.1 3) Whether Rock had provided any good consideration. In the London county court, the decision was in favour of MWB as terms amended during the phone call was said to be invalid because of the NOM clause.

1 Richard Binns, 'Rock V MWB: Legal Certainty or Hinderance Of Commercial Endeavours?' [2019] European Intellectual Property Review.

Student ID: 1983751

Word count: 1170

The Court of Appeal reversed the decision of County court referring to the obiter comments in Globe Motors2, stating that the continued payments by rock and the practical benefit received by MWB mounted to a valid consideration. By entering into the new agreement MWB will be avoiding the loss of potential income as a result of Rock vacating the premises which was taken as a practical benefit referring to the case of Williams v Roffey Bros & Nicholls (Contractors) Ltd3.4 However, the court found the absence of sufficient detriment in support of a finding of estoppel.5 The Supreme Court had only two questions to answer, firstly whether there was a good consideration and secondly the legal effect of NOM clause. The Supreme Court overturned the decision of Court of Appeal in favour of MWB, holding that the oral variation was not valid because of the NOM clause which was legally effective. The SC also stated that after parties reach an agreement as to their future conduct that agreement sets the boundaries of party autonomy.6 However, the Supreme Court declined to rule on the consideration part.

Impact of the case The decision promotes certainty in contracts. Now the parties can be more certain that their written terms will fully reflect on the agreement. The Supreme Court also noted that the enforcement of no oral modification clauses will likely reduce future litigation.7 The number of cases where the parties can argue that there has been an oral variation will be reduced. However, the principle of consideration is still uncertain as Court of Appeal distinguished the principles in Foakes v Beer8 and in Re Selectmove9 and instead followed Williams v Roffey. The case also places some limitation on the principle of party autonomy as Lord Sumption asserted that ‘Party autonomy operates up to the point when the contract is made, but thereafter only to the extent that the contract allows’.10 It is now settled that the court will uphold the terms which the parties have agreed in the prescribed form and amendments have to be made accordingly.

2 Globe Motors Inc v TRW LucasVarity Electric Steering Ltd [2016] EWCA Civ 396 3 [1991] 1 Q.B. 1 4 Binns (n 1) 5 ibid 6 Mitchell Abbott, 'Case Comment: Rock Advertising Limited V MWB Business Exchange Centres

Limited [2018] UKSC 24' 7 ibid 8 [1884] 9 App Cas 605 9 [1995] 1 WLR 474 10 Sophia Purkis, 'Be Careful What You Say No Longer' [2018] New Law Journal.

Student ID: 1983751

Word count: 1170

It is worth noting here that Rock had done nothing over what it was contractually obliged to do under the licence.11 So, there is no question of ‘estoppel’ arising which could have been an issue if the matter was different like Rock had paid increased rent on the basis of an oral agreement.

How the law has been affected The obiter comments in the case of Globe Motors and the decision in the present case left some grey area in the law. The comments supported the principle of freedom of contract and stated that no clause could prevent the parties to make variations to the contract orally, however some relevant cases after the present case cleared that uncertainty. The case of UK Learning Academy Ltd v Secretary of State for Education12 followed the judgment made in Rock Advertising and it was clearly stated that no modification can be made to an agreement if it does not satisfy the necessary contractual formalities. Another relevant case which applied the principles of Rock Advertising was Axis Fleet Management Ltd v Rygor Group Services Ltd13 which laid down the same principle that no oral variation will be valid if the agreement contains a NOM clause. However, there is still some grey area left on the principle of consideration as the Supreme Court declined to rule on that issue because of the conflicting authorities discussed by the Court of Appeal, which will involve the re-examination of Foakes v Beer.

Advice to clients and lawyers If you are granting a licence to occupy a property, give serious consideration to including a no oral modification clause.14 This is a straight forward way to avoid disputes as to the oral conversations between the party regarding rent reduction or licence period. No variations can be made to an agreement if not done in the prescribed manner. The law will uphold requirements on parties to a contract to comply with formalities in order to achieve a binding variation of their original agreement.15 A written agreement in any way will not be undermined which will create more certainty in the agreement process. However, a party can no longer depend on the principle of consideration and estoppel as to the oral variation to an agreement. 11 Donald Lambert, 'Between A Rock & A Hard Place' [2018] New Law Journal. 12 [2018] EWHC 2915 (Comm) 13 [2018] EWHC 2276 (QB) 14 Lambert (n 11) 15 ibid

Student ID: 1983751

Word count: 1170

Conclusion To conclude this briefing report, the case of Rock Advertising adds some barrier to the commercial relationship between contracting parties which requires more flexibility in managing the day to day matters. On the other hand, the inclusion of NOM clause to an agreement will create more certainty and avoid disputes which may arise due to an oral variation to the contract. However, the principle of consideration and the issue of practical benefit are still some questions which needed to be answered.

Table of cases

Student ID: 1983751

Word count: 1170

Globe Motors Inc v TRW LucasVarity Electric Steering Ltd [2016] EWCA Civ 396 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 Q.B. 1 Foakes v Beer [1884] 9 App Cas 605 Selectmove Ltd, Re [1995] 1 W.L.R. 474 UK Learning Academy Ltd v Secretary of State for Education [2018] EWHC 2915 (Comm)  Axis Fleet Management Ltd v Rygor Group Services Ltd [2018] EWHC 2276 (QB)

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Bibliography

 Binns R, 'Rock V MWB: Legal Certainty or Hinderance Of Commercial Endeavours?' [2019] European Intellectual Property Review  Abbott M, 'Case Comment: Rock Advertising Limited V MWB Business Exchange Centres Limited [2018] UKSC 24' accessed 22 April 2019  Purkis S, 'Be Careful What You Say No Longer' [2018] New Law Journal  Lambert D, 'Between A Rock & A Hard Place' [2018] New Law Journal...