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A non-variation clause in an agreement can avoid a lengthy and expensive legal dispute

The importance of a non-variation clause in a contract

The services of an attorney are not cheap. But the consequences of not using an attorney can be much more expensive.

Take, for example, the drafting of a business contract.

It may seem to be an easy matter for anyone with a reasonable command of language to put in writing what has been agreed with another person. In fact, it takes considerable knowledge and experience to set down, unambiguously, what two people have agreed on.

But you can't take every cough to a doctor and, for a variety of reasons, some commercial agreements end up being drafted by businesspeople, and not by their attorneys.

There are a host of traps for the inexperienced when it comes to drafting even a simple contract.

A particular trap is that few lay draftspersons remember to include a non-variation clause in the agreement.

A non-variation clause

A non-variation clause is one which says that no variation or consensual cancellation of the agreement will be of any legal force or effect unless it is reduced to writing and signed by the parties.

Without such a clause, an agreement may turn out to be difficult to enforce, because one of the parties may later say, "Don't you remember, we later verbally agreed to change that clause (or to add another clause, or perhaps to cancel the whole agreement)?."

And now, a full-scale trial will be needed to decide whether or not such a verbal (or more accurately, oral) variation or cancellation was in fact agreed upon.

A non-variation clause is therefore absolutely essential.

For example, in the recent case of Sunset Village SPV (Pty) Ltd v Smith Tabata Buchanan Boyes Inc [2010] JOL 24876 the Cape High Court adjudicated in a matter where two parties had entered into an agreement of sale in respect of certain units in a sectional title scheme, for a purchase price of some R71 million, with a deposit of some R18 million and the balance payable on registration of transfer.

The purchaser paid some R7 million of the required deposit of R18 million, but was unable to get finance to pay the remainder of the deposit.

The seller demanded payment of the balance of the deposit, and a meeting took place between the purchaser and the seller to discuss the matter.

After the meeting, a director of the purchasing company claimed that an oral agreement had been reached at the meeting, in which the seller agreed not to enforce his right to claim payment of the deposit until the development of the scheme had been completed and bonds had been arranged.

The seller denied that any such agreement had been reached at the meeting.

The dispute as to whether or not an oral agreement along these lines had been reached had all the makings of a lengthy court trial, with the calling and cross-examination of a number of witnesses.

However, the original agreement of sale contained a clause which stated that -

"No variation of this agreement shall affect the terms thereof unless such variation shall be reduced to writing under the hands of the parties."

The High Court ruled that the oral variation of the contract, contended for by the purchaser, amounted to a variation of the original agreement and that, in view of the non-variation clause in the agreement, any such oral agreement was of no legal force.

On this ground alone, and without having to enter into the vexed question as to whether or not any oral agreement had indeed been reached at the meeting between the purchaser and the seller, the court was able to rule that, even if such an oral agreement had been reached, the purchaser was precluded from relying on it, and the original written agreement remained in force, unaltered.

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