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Vincent2013, JustAnswer Expert
Category: Law
Satisfied Customers: 213
Experience:  Qualified solicitor and barrister (non-practising) with 7+ years experience
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A contract is signed between 2 MDs of each company. The operations

Customer Question

A contract is signed between 2 MDs of each company. The operations Director of one of the companies verbally changes the contract by asking the MD of the other to alter the way they work and has is willing to stand up in court and admit the he did request the change.

Is this classed as binding
Submitted: 4 years ago.
Category: Law
Expert:  Vincent2013 replied 4 years ago.

Hi, thanks for your question. My name's XXXXX XXXXX I'm going to assist you with it.


Broadly, as long as the terms of a contract do not require any variations to be in writing, parties can amend the contract orally.


For such amendment to be effective there has to be a binding agreement to the variation by both parties (i.e. it needs more than one party simply providing notice of the change to the other and both must agree to it). Directors have ostensible authority to bind the company they are appointed to, so where variation is permissible, a director can make a binding amendment even if that director is different to the one that signed on behalf of the company in the original agreement.


However, there also has to be some sort of "consideration" for the change. Consideration means something in return for the contractual promise or, in the case of a variation, something in return for the amendment to the contractual promise. Consideration can include a mutual abandonment of rights or new benefits being granted. A verbal concession by one party to change their contractual rights will not constitute a variation and, in the absence of consideration, would need to be effected by a written deed.


So, in short, a verbal agreement to change a written contract can be made by directors of the repective parties but there would need to be consideration for the change and the contract would need to be examined to ensure it does not include a provision prohibiting variations other than in writing.


I hope that's helpful. Can I clarify anything for you?

Customer: replied 4 years ago.
Thank you for clarity the agreement was to provide an emergency call out service to gas central heating systems at an agreed rate of £128 per completed call. The contract stated that this rate was for a period of 3 months. The rate was then to be reduced to £122 however the Operations Director of the Company (not the MD who originally signed the contract) agreed to keep the payments the same with the MD of the other company due to the high volume of calls being received.There was no contract variation as this was a verbal agreement on both sides. The MD of the other company has stated that his Operations a director had no right to agree the change and has reneged on the verbal agreement. Does the verbal agreement standVincentIt's been 45 mins since last question and your supposed to answer in 15 mins.
Customer: replied 4 years ago.
Still waiting for response to last question
Expert:  Vincent2013 replied 4 years ago.

Thank you very much for the further information.


As I say, without additional consideration, if one party to a contract abandons contractual rights (including a reduction in contract price), an oral amendment will not usually suffice to contractually amend the agreement. The point regarding the lack of express authority by the managing director is likely to be somewhat irrelevant (as another director would have ostensible authority to bind the company).


There is another potential line of argument, outside contractual principles, and this is the doctrine of "waiver estoppel". For this to operate there has to be conduct by a party which unequivocally shows an intention to waive a contractual right. This could include a statement or promise that a right will not be enforced as well (as forbearance from enforcing it). However, for the doctrine to operate the other party would also have to show "reliance" on that conduct and that, due to such reliance, it would be inequitable for the party making the waiver to go back on it.


Reliance could include for instance spending money or carrying out actions it would not have done if the waiver had not been given. If there is no such reliance, there can be no argument for waiver by estoppel, I'm afraid.


I hope that's helpful. Can I clarify anything further for you?