Actions speak louder than ‘written’ words

Year Published: 2014

For those of you familiar with commercial contracts you have no doubt heard the phrases ‘boilerplate’ and ‘entire agreement’ clauses.

Bolierplate clauses provide interpretation and general operation for the agreement. One such clause is an ‘entire agreement’ clause. In essence this provides that everything agreed between the parties is embodied in the written agreement and therefore no other evidence can be presented to try and vary this agreement.

Or can it?

Varying an agreement despite an entire agreement clause

The High Court in Virulite LLC v Virulite Distribution Ltd has recently ruled that a contract in writing can be varied orally despite an entire agreement clause.

In this case a payment between the parties was due in 2008 under the terms of the distribution agreement. However, there had been an oral variation of the agreement which provided that the payment would not be due until after regulatory approval of the product to be sold under the distribution agreement.

Before approval was obtained the party to receive payment tried to terminate the agreement, but not in accordance with the terms of the agreement. When the paying party claimed that this was a breach of contract entitling them to terminate the agreement and claim damages (known as a repudiatory breach of contract), the claim was defended on the basis that the paying party had actually breached the agreement first by not making the payment due in 2008.

The court disagreed. It held that the agreement, notwithstanding the entire agreement clause, had been orally varied i.e. that the payment was not due until after regulatory approval.

Furthermore the court held that even if there had not been an oral variation to the agreement the Defendant had waived its right to enforce the term relating to payment.

So what do we learn from this?

Boilerplates are not bombproof.

Even the most carefully drafted boilerplate and in particular entire agreement clauses, are not immune to a variation by oral agreement. You need to remain vigilant as to the consequences that your actions may have on a written agreement, and do not become complacent and believe the boilerplate clause will come to your rescue.

For further information on boilerplate clauses and commercial contracts contact our Dispute Resolution team on 0161 475 7676.

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