MWB Business Exchange Centres Ltd v Rock Advertising Ltd [20...

Facts

• Rock Advertising Ltd was in arrears under a license agreement with MWB Business Exchange Centres Ltd for the use of commercial premises.
• An oral agreement was reached to reschedule Rock's payment obligations, allowing reduced initial payments, with the intention that shortfalls would be made up later.
• MWB subsequently alleged Rock had breached the original contract by failing to make adequate payment, disregarding the oral variation.
• The dispute centred on whether the oral payment rescheduling constituted a legally binding modification to the original contract.
• The original license agreement contained a clause prohibiting oral variations (an anti-oral variation clause).

Issues

1. Whether an oral agreement to accept less than the contractual sum owed could legally vary a contract containing an anti-oral variation clause.
2. Whether the rescheduled payment plan amounted to good consideration, sufficient to uphold the contract variation, despite Rock only agreeing to pay what they were already contractually obliged to pay.
3. Whether the doctrine of “practical benefit,” recognized in Williams v Roffey Bros, could extend to promises to accept less under a pre-existing duty, despite the precedent set by Foakes v Beer.

Decision

• The Supreme Court held that the oral agreement to vary the payment schedule was not binding due to the anti-oral variation clause.
• The Court recognized valid commercial reasons for upholding such clauses, to prevent inadvertent contractual modifications.
• In obiter dicta, the Supreme Court declined to extend the “practical benefit” principle to cases involving agreements to accept less than a contractual debt, leaving the Foakes v Beer precedent intact.
• The decision overturned the Court of Appeal’s ruling, which had found for Rock on the basis of practical benefit and contractual freedom.

Legal Principles

• A contract containing an anti-oral variation clause cannot be informally varied by oral agreement; such clauses are enforceable.
• The principle from Foakes v Beer remains authoritative: a creditor’s agreement to accept less than is owed does not constitute good consideration and is not binding without an independent consideration.
• The “practical benefit” doctrine developed in Williams v Roffey Bros does not apply to part-payment of debts following Foakes v Beer and In Re Selectmove.
• Freedom to contract does not override clear, express anti-oral variation clauses in commercial agreements.

Conclusion

The Supreme Court in MWB v Rock Advertising Ltd confirmed that anti-oral variation clauses are enforceable and that the longstanding rule in Foakes v Beer still prevents practical benefit from constituting good consideration in cases of part payment of debt, leaving the doctrine of consideration for contract modification unchanged unless overruled by a larger Supreme Court panel.