A contract in writing which contains a clause requiring any modification or termination by agreement to be in a particular form may not be otherwise modified or terminated. However, a party may be precluded by its conduct from asserting such a clause to the extent that the other party has acted in reliance on that conduct. 

 

COMMENT

Parties concluding a written contract may wish to ensure that any modification or termination by agreement will also be in writing or otherwise in a particular form and to this end include a special clause in the contract (e.g. “Any modification of this Contract may be made only by a writing signed by both Parties"; "Alterations to the above-indicated Time-schedule must be confirmed in writing by the Engineer’s representative on site”).

This Article states that as a rule such a clause renders ineffective any modification or termination by agreement not in the particular form required.

 

Illustration

 

1. Contractor A contracts with purchaser B for the construction of a building. The contract provides that any modification to the work schedule must be in writing and the document must be signed by both parties. In the course of construction, A sends B an e-mail asking B to agree to the extension of a particular deadline. B accepts by return of e-mail. The modification is ineffective since there is no single document bearing both parties’ signature.

 

Yet there is an exception to the general rule. In application of the general principle prohibiting inconsistent behaviour (see Article 1.8), this Article specifies that a party may be precluded by its conduct from invoking the clause requiring any modification or termination to be in a particular form to the extent that the other party has reasonably acted in reliance on that conduct.

 

Illustration

 

2. A, a contractor, contracts with B, a school board, for the construction of a new school building. The contract provides that the second floor of the building is to have sufficient bearing capacity to support the school library. Notwithstanding a “no oral modification” clause in the same contract, the parties orally agree that the second floor of the building should be of non-bearing construction. A completes construction according to the modification and B, who has observed the progress of the construction without making any objections, only at this point objects to how the second floor has been constructed. A court may decide that B is not entitled to invoke the “no oral modification” clause as A reasonably relied on the oral modification, and is therefore not liable for non-performance.

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