Non-Variation Clauses: Actions Speak Louder Than Words

Non-variation clauses are an evergreen boilerplate provision found in commercial contracts. They typically provide that a binding variation of a contract is generally limited to certain prescribed circumstances, most likely for the variation to be formalised in a written instrument and signed by the contracting parties. Most understand this to be the final word on the matter. However, recent case law has cast this into doubt, reflecting an apparent shift in the Courts' attitude towards these types of clauses.

The New Case Law

In Virulite LLC (V LLC) v Virulite Distribution Limited (VDL) [2014] EWHC 366, VDL had developed a novel treatment for cold sores and launched the product in the UK, subsequently entering into a distribution agreement with V LLC. The agreement contained a standard non-variation clause stating that any modifications of the agreement had to be in written and executed form. V LLC was obliged to make various milestone payments to VDL under the agreement, which included a £25,000 payment upon the delivery of clinical information to V LLC. However, VDL was delayed and provided limited data to V LLC, so the parties negotiated by email and a conference call that the £25,000 payment would be deferred; however this was not formally recorded. VDL subsequently proceeded to serve notice to terminate the agreement based on V LLC's failure to pay. The court concluded that there were three instances where the original agreement had been varied, most notably in the conference call, and that the conduct of the parties...