This blog was authored by Jason Hudson, Trainee Associate.
A February high court judgment involved a dispute over a master rental agreement for leasing office equipment. The monthly rent in the agreement was crossed out and changed to increase the rent, but the change was only initialed by one party to the agreement and not signed by both.
This case reaffirmed the long-standing principle that holds that a contractual clause requiring variations to be in writing and signed by both parties must be strictly enforced. Accordingly, if an agreement contains a non-variation clause, amendments cannot be made orally or unilaterally. The agreement contained such a clause, stating that any amendments would only be valid if in writing and signed by both parties. The disputed amendment was handwritten and not signed by both parties. Since the amendment did not comply with the non-variation clause, the court found it legally ineffective.
It was argued that enforcing the non-variation clause in this case would be contrary to public policy, relying on cases where the courts have refused to enforce contractual terms on grounds of fairness. The court noted that public policy should only be used to invalidate contractual terms in exceptional cases, and that it should not interfere with freely negotiated contracts unless their enforcement would be unconscionable or oppressive. A contract cannot be set aside simply because it causes hardship or appears unfair to one party.
Both parties had freely agreed to the non-variation clause, and its enforcement did not result in an outcome that was contrary to constitutional values or fundamental fairness. The ineffective increase in rent was a mistake rather than a deliberate act of deception.
The contract was commercial in nature, and no constitutional rights were at stake. The non-variation clause was upheld, and the disputed amendment was invalid. The public policy argument failed, as there was no compelling reason to set aside the clause.
This case reinforces the enforceability of non-variation clauses, reaffirming that parties must comply with contractual formalities if they wish to amend their agreements. It highlights the importance of legal certainty in commercial contracts, ensuring that agreements are predictable and enforceable, even when one party later regrets the terms.