Written Contracts Can Be Orally Varied – So Watch What You Say!

The first resort of anyone involved in a contract dispute will be to look carefully at the wording of the document itself. However, one High Court case involving a delayed construction project underlined that words said and promises made after signature can have the effect of varying contractual terms.

In a deal worth £3.5 million, company A had agreed to provide consultancy services to company B in respect of the construction of two food processing plants. Following a substantial delay in the works, company B agreed to make an additional payment of £784,661 to company A for its continued work on the project.

The payment was expressed to be due, without set-off or deduction, 14 days after completion of the project or on a particular date, whichever came earlier. Company A submitted an invoice for the relevant sum on the basis that completion had been achieved. However, that was disputed by company B, which argued that the invoice had been sent prematurely and refused payment.

The Court found that, at a face-to-face meeting and in email exchanges after the contract was signed, company A had agreed to defer submission of its invoice. However, that did not amount to a binding variation of the contract in that company B gave nothing in return and there was no agreement as to the period of deferment.

However, in refusing to grant company A summary judgment in the amount of the invoice, plus interest, the Court found that company B had a viable defence to the claim. Company B claimed that company A was in part responsible for the delay and, given the possibility of a substantial counterclaim, it was arguably unfair of the latter to insist on immediate payment of the invoice. Other issues, including the date on which practical completion had in fact been achieved, could also only be resolved by a full trial of the action.