Our law recognises that an agreement can be concluded tacitly to replace a previous agreement and a non-variation clause does not preclude the parties from doing so. This principle was recently confirmed by the Supreme Court of Appeal.
In Ocean Echo Properties v Old Mutual the parties were contracting under a lease. The landlord sued the tenant for rental and other charges in arrears. The tenant pleaded that they had abandoned the premises at an earlier date when they were not in arrears. The tenant alleged that the landlord had subsequently entered into a tacit agreement with a new tenant. By allowing the new tenant occupation and receiving rental from her, the previous tenant pleaded that the landlord had subsequently entered into a tacit agreement with the new tenant. That tacit agreement, if proved, would have the effect of terminating the operation of the original lease in respect of future obligations, leaving intact the obligations that arose from the past operation of the lease (arrear rent for instance).
The landlord pleaded that the lease agreement contained a non-variation clause and that the alleged tacit termination amounted to an alteration or variation of the lease without reducing it to writing and signature; and therefore the purported tacit termination was contrary to the express provisions of the lease.
The court held that such a termination does not mean that there is a variation of the terms of the original agreement. Even though there was a non-variation clause, the defence of a tacit election to terminate was a good defence if proved.
The courts are always reluctant to enforce the harsh consequences of a non-variation clause except in clear circumstances and this is another example where the court found there may be good reasons not to do so.