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Peppercorns and Chocolate Wrappers

How does the concept of 'consideration' work in the modern world? Yesterday the Supreme Court grappled with this question in the appeal of MWB Business Exchange Centres Ltd v Rock Advertising Ltd.

The Supreme Court was asked to rule on whether a written agreement which contains an anti-oral variation clause (also known as non-oral modification or NOM clauses) can be varied other than in accordance with that clause. It was also asked to rule on whether the trial judge's findings of fact, that there was a practical benefit to the landlord/licensor in the variation, could amount to consideration at law or should Williams v Roffey Bros [1991] 1 QB 1 be restricted to its own facts.

Rock Advertising ("Rock") occupied serviced offices managed by MWB under a written licence agreement which contained a clause stipulating that all variations to the licence must be made in writing and signed, the Non-oral modification clause ("NOM clause"). Rock hit financial difficulties and struggled to make the licence payments.

Representatives from Rock and MWB discussed over the telephone a new payment plan which meant that for the first few months Rock would pay less than the amount originally agreed but thereafter it would pay more so that Rock's arrears would have been cleared by the end of the year. Rock paid the first instalment (£3,500) of the new payment plan on the same day of the telephone discussion. MWB subsequently said the full amount of the licence fee was in fact due and then purported to exercise its right under the unvaried licence agreement and locked Rock out of the premises and shortly afterwards gave notice to terminate the agreement. MWB then issued proceedings to recover the arrears.

The trial judge held that an oral agreement had been entered into, amounting to a variation of the licence, which was supported by consideration in the practical benefit that Rock would honour some and hopefully all of its obligations and that Rock would continue to occupy so the premises would not be left empty. The judge held however that the variation was not enforceable due to the NOM clause.

Rock successfully appealed to the Court of Appeal. The Court of Appeal held that autonomy of the contracting parties allowed them to mutually override the NOM clause following Globe Motors Inc & Ors v TRW Lucas Varity Electric Steering Ltd [2016] 1 CLC 712. MWB was granted permission to appeal to the Supreme Court.

Can contracting parties bind themselves irretrievably when entering into a contract? Is 'practical benefit' the modern equivalent of 'the horse, the hawk or the robe' and an alternative to 'the chocolate wrapper' or 'the peppercorn'? The Supreme Court will supply the answers sometime this spring.

Michael Paget and Zoë Whittington appeared for Rock Advertising Ltd.