A Verbal Contract. Is It Worth the Paper It’s Not Written on?

A Verbal Contract. Is It Worth the Paper It’s Not Written on?

A Notary spends his life dealing with paper. Paper which is trying to define and document events and relationships in order to ascertain what obligations were created or acknowledged at that date.

Trouble is, it turns out, things change.

It has been said that there may be a Global West-East division of thinking about contracts and their meaning,

The West comes at it from a history where the concept used to be that the written paper actually was the contract. If it was torn up, the contract vanished. Now, we don’t really believe that any more, but we still in England consider that the essence of the contract is to be discovered from reading the words on the paper.

Whereas, at least anecdotally, the Eastern view is more akin to an understanding of the written words as being a photograph of the agreement, on the day it was made. “Look at our little agreement, as it was on the day it was born ten years ago, And my, how it has grown up and changed!”

And the Law in England now certainly accepts that contracts do not need to be written on paper.

Except for land contracts; commercial and personal Contracts can certainly be made verbally, and indeed the existence of a binding contract can be the consequence of a consistent course of trading conduct, with nothing specific ever said or written down.

And too, over the course of a business relationship, the obligations and the way of dealing with them can evolve. And whilst it is obviously sensible to “get the lawyers in” to prepare original contracts, it can be very expensive to do, essentially getting the whole contract overhauled, every time there is a small change in the terms.

It could also be felt that to do so would seem overly fussy or even be harmful to the relationship. – “Don’t you trust me?”

And if it is the law, that contracts can be made by words or conduct and also in consequence of written agreements, then there is scope for the law to tie itself into knots.

Because a written contract can say, and often does, words to the effect that “this paper contains the final agreement made between the parties and no verbal or other amendment to it shall be effective. It may only be amended by a future written document and if so it must be signed by all of the parties”.

That seems clear enough.

Except, as I have said, the law is that verbal contracts are quite possible in England. And the Law of the Land supersedes the words of a written contract you might think.

So if you and I write into our written contract that it cannot be changed by a later verbal agreement between us, and also the Law of England says that verbal agreements are valid, but that written ones are also, there is a paradox.

Like that of the barber, who is a clean shaven man, who is the only person who shaves only all the men who do not shave themselves. [He cannot shave himself, but neither can anyone else, yet he is shaven].

Or like Russell’s paradox of the set of all things which are not part of a set, link here.

Something has to give.

The recent case of Globe Motors [decision in the Court of Appeal link here] dealt with just such a case. It also tried to reconcile two earlier cases.

In the first one the Judge had decided that a verbal amendment to a written contract could not be effective, because the written contract said all future variations had to be in writing.

In the second case, the same Judge [yes, I know] had reached the opposite decision. He said, a later oral agreement may form a secondary contract which has the effect of varying the written contract.

The Court of Appeal has decided now in Globe Motors, in effect, that the terms of a written contract which says its terms cannot be varied unless the variations are also written and signed by the parties, may be later varied even if they are not.

It is not happy about its own decision and one of the Judges said “It does not follow that clauses ….[of this kind] … have no value at all.”

The effect of the clause is explained, as to make it significantly harder for a party to persuade a court that their claimed later verbal variation was actually intended to effect a variation to a contract which contained a provision requiring written variation, than to one which did not.

Yebbut, Harder? How? That was always going to be difficult, wasn’t it?

Seems to me, the effect of the written clause purporting to ban future unwritten variations, has in fact been reduced to – no effect at all.

But, given that it is always easier to prove a contract if the terms of it are written down what have we learnt? Answers to me on a postcard please [yes, written down].

Ok my head is spinning, how is yours? Link to A Song

As always, for accurate Notarial acts and records, please do contact me or Louise whenever you need Notarial certification or Legalisation for your Documents– at http://www.atkinsonnotary.com – or phone me on 0113 816 0116 (internationally 0044 113 8160116)