Introduction
In English contract law, parties often include clauses to control how their agreement can be changed. These clauses, sometimes referred to as ‘ouster clauses’ in a general sense, include ‘No Oral Modification’ (NOM) and ‘entire agreement’ clauses. They aim to promote certainty by ensuring that the written contract is the complete and final record of the parties’ obligations. However, this aim can conflict with the equitable doctrine of promissory estoppel, which can prevent a party from going back on a promise that has been relied upon by another, even if that promise was made informally. This essay will examine whether a contractual clause can effectively oust the doctrine of promissory estoppel. It will be argued that while the Supreme Court has strongly affirmed the validity of such clauses, they do not create an absolute bar to a claim of promissory estoppel, although they make it significantly more difficult to succeed.
The Purpose and Effect of Contractual Ouster Clauses
Contractual clauses designed to control variations are common in commercial agreements. An ‘entire agreement’ clause states that the written document contains the whole agreement between the parties, preventing them from relying on pre-contractual statements. A NOM clause goes further, stipulating that any amendments or variations to the contract must be made in writing and signed by the parties. The primary purpose of these clauses is to achieve contractual certainty and avoid disputes over whether a variation was agreed and what its terms were (McKendrick, 2022).
The legal status of NOM clauses was definitively settled by the Supreme Court in Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24. In this case, a landlord (MWB) and tenant (Rock) had a lease containing a NOM clause. Rock fell into arrears, and its director proposed a revised payment schedule in a phone call with MWB’s credit controller, who agreed. MWB later demanded the full rent arrears and sought to terminate the lease, relying on the NOM clause. The Supreme Court, in a judgment led by Lord Sumption, held that NOM clauses are legally effective. He argued that the law should give effect to the parties’ agreement on how their contract can be varied, just as it gives effect to their other obligations. To hold otherwise would be to override the parties’ intentions and undermine contractual certainty.
Promissory Estoppel as a Potential Exception
The doctrine of promissory estoppel, which famously emerged from Lord Denning’s judgment in Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, operates to prevent a party from acting inconsistently with a promise not to enforce their strict legal rights. The doctrine requires a clear and unequivocal promise, reliance on that promise by the other party, and for it to be inequitable for the promisor to go back on their word. The question is whether this equitable doctrine can be used to enforce an oral variation where a NOM clause exists.
In Rock Advertising, Lord Sumption directly addressed this issue. He accepted that the enforcement of a NOM clause could be subject to estoppel. However, he set a high threshold for it to apply. He stated that for an estoppel to arise, there would need to be more than just the informal promise itself. There would have to be some words or conduct by the promisor which unequivocally represented that the oral variation was valid despite the formal requirements not being met, and the other party would have to have relied on that representation. Lord Sumption suggested that in the context of a NOM clause, the scope for estoppel is "very limited" ([2018] UKSC 24, at [16]). Merely reaching an informal agreement is not enough to found an estoppel, because the promisee's reliance would not be on the validity of that agreement, but rather on the promisor's implicit promise to honour it despite the NOM clause.
Analysis: A Difficult Balance
The approach in Rock Advertising demonstrates the courts’ attempt to balance the competing principles of contractual certainty and the prevention of unconscionable conduct. By giving full effect to NOM clauses, the Supreme Court prioritised the parties' autonomy to prescribe the rules for their own contractual relationship. This reduces the risk of litigation over alleged oral variations and protects businesses from informal discussions being elevated to binding changes.
However, by leaving the "door ajar" for estoppel, the court recognised that a rigid application of NOM clauses could lead to injustice. If a party makes a clear promise that they will not insist on the formality of the NOM clause, and the other party relies on this to their detriment, it would be unconscionable to allow the first party to then use the clause as a "get out of jail free" card. The high threshold set by Lord Sumption ensures that estoppel cannot be used to simply bypass a NOM clause in every case. The party seeking to rely on estoppel must prove something more than the oral agreement itself, such as an explicit statement or clear conduct from the promisor indicating that they would not enforce the NOM clause. This preserves the general effectiveness of the clause while retaining estoppel as a safety valve against genuine inequity.
Conclusion
In conclusion, a contractual ouster clause, such as a No Oral Modification clause, cannot entirely prevent a party from raising promissory estoppel. The Supreme Court in Rock Advertising confirmed that the doctrine of estoppel can, in principle, operate as an exception to the enforcement of such clauses. However, the decision also made it clear that the circumstances in which an estoppel can be successfully argued are very narrow. A party cannot simply rely on the oral variation itself; they must demonstrate that the other party made a further representation that the informal variation would be binding despite the clause, and that they relied on this representation. Therefore, while such clauses do not completely oust the jurisdiction of equity, they create a formidable obstacle, ensuring that the principle of contractual certainty is upheld in all but the most exceptional cases where it would be truly unconscionable to do so.
References
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130.
McKendrick, E. (2022) Contract Law. 15th edn. London: Palgrave Macmillan.
Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24.
