Or put another way, do contracts really mean what they say?
If you are as old as me, you may remember the Fun Boy Three singing something like that. If you can remember the Fun Boy Three, you will also remember those days in law school when you were told time and time again that the “contract is king”. Well, like so many things in life, things seem to have moved on and are no longer the way they were, or at least, the way they seemed.
I have in mind those no waiver and no variation clauses that we see so often in construction contracts. You know the ones, such as:
“The obligations and liabilities of the contractor under this Agreement shall not be released, diminished or in any way affected by any inspection, consent, comment or confirmation made or given by or on behalf of the employer or the employer’s agent or any failure by the employer to enforce strict compliance with the terms and conditions of this Agreement.”
and
“No variation of this contract will be effective unless made in writing and signed by the parties.”
I always thought that those clauses meant what they said. I bet you did too. However, I was wrong and, and if you did, you would also have been wrong. The Court of Appeal has told me so in Tele2 International Card Company v Post Office and in Westbrook Resources v Globe Metallurgical.
Tele2 International
Here the court considered a non-waiver clause. It concluded that despite the existence of the clause, in the absence of any express reservation of rights at the time, an innocent party could affirm the other party’s breach of contract, which prevented the innocent party from subsequently relying on that breach to terminate the contract. The question of whether there had been an affirmation or waiver was a question of fact. Either the innocent party had affirmed the contract or it had not. (In this case, the “innocent party” (the Post Office) had waited 11 months before trying to terminate the contract and the court said it had waited too long.)
Westbrook Resources
In this case, the court came to the same conclusion but this time, in respect of a no variation clause. Rather cunningly, the court found there was no reason why the contract, including the clause requiring variations to be in writing, could not have been varied orally.
So, now we all know. Contracts, like so many other things in life, don’t always do what they say on the tin. If they did, life (and the law) would just be too simple.
