Oral variations of an agreement – are they valid?

You decide to rent a cottage from a friend and live in his backyard for a year or two. You both agree that it would be wise to enter into a lease agreement and have the necessary agreement drawn up. Everything goes well until the monthly rental increases as per the agreement. You discuss the situation with your friend who agrees to waive the increase verbally. But is this sufficient and can you legally rely on his word only?

Contracts govern the relationship between parties entering into any legal transaction and exist to achieve certainty and avoid disputes which may arise in the future. Contractants therefore can choose how they wish their situation to be regulated in order to ensure that their relationship remains harmonious. Whether you can rely on the validity of your friend’s word to waive a contractually determined increase will therefore depend on whether you have included a non-variation clause in your contract. A non-variation clause, in essence, means that any cancellation or variation to the agreement will be of no effect unless it is reduced to writing and signed by both parties. The predominance of a non-variation clause was put to the test in Xtraprops 66 (Pty) Ltd v Phiopater Supplies (Pty) Ltd.

In this case the applicant applied for the eviction of the respondent who was in arrears with rentals from a business premise that the respondent was leasing from the applicant in terms of an agreement of lease. The respondent opposed the application on the basis of an alleged agreement concluded orally between the representatives of the applicant and respondent in which the applicant would accommodate the respondent’s financial hardship in meeting its rental obligations by accepting payment of 25% of the daily profits of the restaurant business conducted by the respondent on the leased premises. The respondent alleged that it had been complying with the terms of the verbally amended agreement, but the applicant disputed the validity of the amended agreement on the grounds of a non-variation clause included in the lease agreement.

To determine whether the verbally amended agreement had the potential to disregard the non-variation clause, the Court relied on an established principle in our law which determines that when parties contractually establish formalities such as requirements that any consensual cancellation or variation of their agreement must be in writing and signed by both the parties to be of any force or effect, the parties then bind themselves by such a contract to observe such formalities and any subsequent agreement to which the formalities were intended to apply would be unenforceable unless compliant with these self-imposed formalities. In other words, since the parties in this case had elected to have a non-variation clause in the lease agreement, they accordingly barred themselves from verbally amending their lease agreement.

Ultimately, to answer any question as to whether an oral variation to a contract is valid, you must revert back to the provisions of the contract. Unless the contract does not expressly make provision for any variations to be reduced to writing and signed by both parties, verbal variations may be valid and enforceable, although it will be necessary for the parties to be able to prove the existence of such a verbal variation – something which could prove to be quite difficult. It is therefore always safer to play it smart and ensure your variations are recorded in writing and signed by both parties.

March 16, 2015
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