Can I have that in writing please? The importance of complying with variation mechanics in contracts.

In the recent case of GSY Hospitality Ltd v Gladstone Court Developments Ltd [2025] EWHC 3231, the High Court reaffirmed the power of no oral modification (or NOM) clauses whilst also providing a reminder of the circumstances in which a court will set aside a determination by an expert. In granting summary judgment to declare an expert determination in respect of the underlying dispute non-binding, this decision is an important lesson to parties seeking to amend the terms of existing written agreements: it is crucial to ensure that any variations comply with the requirements of the underlying contract. Simple oral agreements are unlikely to be enough in the face of a clear NOM clause.

Background facts 

The case centred around a sale and purchase agreement (SPA) in respect of a hotel development at 1 and 3-5 Great Scotland Yard, London. The claimant (GSY Hospitality Limited or GSY) had agreed to purchase the leasehold of the property from the defendant (Gladstone Court Developments Limited or GCDL) once works to construct and fit out the property had been completed by GCDL.

Part way through the development, the parties agreed to vary the scope of the works and the total number of hotel rooms, and recorded this – along with an apportionment of certain construction costs – in a written agreement (the Variation Agreement) in early 2017, as well as in a separate operating services agreement the parties had executed in connection with the development (the AOSA).       

GCDL asserted that this apportionment was superseded by a subsequent agreement between the parties, which then became the subject of a dispute referred to expert determination for resolution in accordance with provisions in the SPA.

In the event, GCDL was successful in persuading the expert that a subsequent oral agreement had been reached to cap GCDL’s liability for these costs at £800,000, notwithstanding the apportionment contained in the Variation Agreement and the AOSA, and the existence of clearly worded NOM clauses in both the SPA and the AOSA.

GSY brought an application pursuant to CPR 24.3 for summary judgment to declare this determination to be non-binding, on the basis that the expert’s determination was erroneous as a matter of law and/or contained a manifest error (reasons for which it could be set aside under the terms of the SPA). After reviewing the authorities on overturning expert determinations, and the interpretation of NOM clauses, the High Court granted summary judgment in GSY’s favour.

Summary judgment

GSY’s case for summary judgment turned on the assertion that the expert had made a finding for a purported oral agreement which post-dated the SPA, the Variation Agreement and the AOSA, in spite of the existence of both an entire agreement clause, as well as the following NOM clause in the SPA:

“This Agreement may only be varied or modified by a supplemental agreement which is made in writing by the parties or their solicitors and in such a form that complies with the requirements of the Law of Property (Miscellaneous Provisions) Act 1989.”

Similar provisions were included in the AOSA, and GSY argued that the subsequent oral variation had not been evidenced in the manner required by either the SPA or the AOSA.

The expert had reached his finding based on a combination of: (a) oral evidence in the form of witness statements (which referred to events at meetings rather than any written agreement); and (b) the absence of any challenge from GSY to interim payment applications made by GCDL which referred to its liability for the costs in question being capped at £800,000.

The SPA also provided, in relation to expert determination, that:

“Decisions of the Specialist will be final and binding on the Parties except in the case of manifest error or in relation to questions of law.”

In granting summary judgment for GSY (on the question of whether the expert’s decision was binding), the High Court agreed with GSY that the expert had failed to consider the NOM clauses, or the principles laid down by the Supreme Court in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24 (Rock Advertising) in relation to their effect, and as such had erred in law, rendering his decision non-binding in accordance with the terms of the SPA.

The following aspects of the High Court decision are worth noting:

1. The Supreme Court’s guidance in Rock Advertising remains clear: NOM clauses are enforceable, and courts are unlikely to treat non-compliant oral modifications as evidence that contracting parties have intended to dispense with them. As set out in Lord Sumption’s judgment in Rock Advertising: “It is not difficult to record a variation in writing… the natural inference from the parties’ failure to observe the formal requirements of a No Oral Modifications clause is not that they intended to dispense with it but that they overlooked it. If, on the other hand, they had it in mind, then they were courting invalidity with their eyes open”.

For this reason, it is vital when amending a contract to ensure compliance with any express formalities.

2. GCDL had argued that even if the reasons for the expert’s decision were flawed, the outcome was correct and so summary judgment in GSY’s favour would serve no purpose. This was based on GCDL’s contention that GSY would ultimately be estopped from relying on the NOM clause at trial due to its conduct in not challenging interim payment applications which referred to the cap. However, while estoppel may act as a safeguard in certain circumstances, the High Court stressed that these are limited. While the courts recognise that in some cases it may not be equitable for one contracting party to rely on an oral contract modification only to later find itself unable to rely on it, arguments based on estoppel by convention are unlikely to succeed without: (i) words or conduct which unequivocally represents that the oral variation is valid notwithstanding its informality; and (ii) substantive steps being taken in reliance of the variation beyond the mere informal promise.

If for some practical reason (e.g. time or cost constraints) a variation cannot comply with the formality requirements of the underlying contract, it is therefore crucial to obtain clear contemporaneous evidence (whether by meeting minutes or email records) that the parties are aware of those requirements and intend the informal amendment to have effect regardless. However, even in such circumstances, best practice would be to record any such agreement in a formal written agreement as soon as possible thereafter.

3. Once it is shown that an expert departed from their instructions in a material respect the court is not concerned with the effect of that departure on the result. It therefore does not matter whether an expert may have come to the correct conclusion albeit by an erroneous means – such a determination will not be binding.

This conclusion meant that, even though GCDL may have had a bona fide claim to rely on the £800,000 liability cap by way of an estoppel by convention, this was ultimately something that would need to be determined at trial, and could not cure the expert’s departure from his obligations.

Conclusion

While this case does not lay down any new law, it serves as a useful study in the importance of complying with contractual formalities. In the UK construction industry, reliance on informal arrangements and “handshake agreements” remains not uncommon, and the result for GCDL in this decision highlights the inherent risks of doing so. Absent exceptional circumstances, courts will not step in to rescue parties from non-observance of these clauses. While complying with formalities can have time and cost implications, picking up a pen and doing it by the book can avoid a headache in the long term.