Any Amendment Must Be In Writing, Signed By The Parties

Sometimes Contracts Quite Literally Do Not Mean What They Say

The English Court of Appeal recently held that an express clause in a contract requiring that any amendment be in writing and signed by the parties does not preclude oral or unsigned amendments to the contract. In holding that an oral amendment could be effective notwithstanding an "anti-oral amendment" clause, the Court of Appeal settled divergent English case law on the point, and provided persuasive authority for a similar result in Canada.

The result is important not only for alleged oral amendments in the face of clauses requiring amendments in writing signed by the parties, but also for the relatively common practice of contractual amendment by exchange of email. The implications of the decision may be of particular importance on summary judgment motions, where the responding party asserts an alleged oral amendment in the face of a contractual provision prohibiting such a form of amendment.

Background

Globe Motors, Inc. v. TRW Lucas Varity Electric Steering Limited, [2016] EWCA Civ 396 concerned a long-term supply contract for electric motors and leadframe assemblies between Globe and TRW Lucas, whereby TRW Lucas agreed to purchase the specified parts only from Globe, and Globe agreed to supply those parts only to TRW Lucas. TRW Lucas subsequently acquired parts slightly different from those under the contract from one of Globe's competitors. A key issue before the Court was whether the new parts fell within the scope of the contract such that TRW Lucas was contractually obliged to obtain them from Globe. The lower court found that the new parts fell within the ambit of the contract, that TRW Lucas was therefore in breach of the contract, and that damages of £10,095,095 were appropriate. However, the Court of Appeal allowed the appeal and found that the new parts were materially different than those under the contract, and that TRW Lucas was therefore not in breach of the contract.

A secondary defence raised by TRW Lucas was that, even if it had breached the contract, the losses were minimal as Globe had transferred its manufacturing to a subsidiary, Globe Motors Portugal (referred to as "Porto" in the decision), which was not a party to the contract. Globe argued that Porto was a party to the contract through an oral amendment. Therefore, an important secondary issue in the proceeding was whether Porto became a party to the agreement, even though it was not a party to...