No Oral Modification clauses to the test: how relevant are they in the COVID-19 shock and beyond?

Abstract

The focus of this article will be on the function, use and judicial recognition of No Oral Modification clauses (NOM clauses). These terms usually form part of entire agreement clauses to be found in numerous commercial contracts. A No Oral Modification clause is a contractual term prescribing that an agreement may not be amended save in writing signed by or on behalf of the parties. An entire agreement clause prevents statements or representations that are not set out in a written agreement from having contractual force. According to Chitty, the practice of entire agreement clauses probably originated in the United States. No oral variation clauses, among other clauses, such as force majeure clauses, are more relevant than ever. Due to the COVID-19 pandemic challenging timeframes and the ability of the parties to perform their contracts, businesses have experienced time pressure, cash flow difficulties, lack of revenue, restrictions in their operation, and as anticipated, the immediate effect is on compliance with their contracts. Commercial contracts are thus affected. Experienced businessmen will explore ways to modify their duties to ensure they perform on the basis of what is doable, eg limit the amount of obligations, agree on more extended timelines for performance or limit imminent or longer-term performance of obligations. In a nutshell, this means that commercial practitioners will seek to somehow amend their contract. More notably, because of the pandemic and the hardship it brings forward, parties involved may try to invoke a contractually available force majeure clause. However, the latter may need to be read with the NOM clauses, which, as we shall see, are almost as important as redhand rule clauses. The original questions that this article will pose and then answer are the following: 1. How popular are NOM clauses in commercial contracts? The methodology that we will follow will look at real life commercial contracts of the following two types: commercial leases and shipping contracts. 2. Are NOM clauses prevalent? 3. How are English courts upholding NOM clauses? The role of Rock Advertising will be of particular consideration. What is the importance of the recent English judicial development when compared with the quantitative results of the appearance of NOM clauses in commercial leases and standard shipping contracts?