Education Provider Left High and Dry in 'No Oral Variation' Contract Row

Many commercial contracts contain clauses which state that they can only be varied in writing. Such provisions offer the advantage of certainty and, as a company that provided educational services to a government agency discovered to its cost, they mean what they say.

The company contracted with the Learning and Skills Council (LSC) to provide NVQ and Skills for Life courses in an English region over a 12-month period. The contract stated that its terms could not be varied other than by an agreement in writing, signed by both parties – the no oral variation clause.

It was envisaged that the company would provide courses for about 200 adults and the contract stated that it would receive a maximum of £135,553 for its services. The number of pupils who took advantage of the company's services, however, was almost triple that number.

The LSC remitted the maximum sum provided for by the contract but, in reliance on the no oral variation clause, it refused the company's request to be paid an additional £800,553. The company launched proceedings against the Secretary of State for Education, but its claim to the additional sum was rejected by a judge.

In challenging that outcome before the Court of Appeal, the company argued that an effective variation of the contract had in fact been agreed and that the LSC's reliance on the no oral variation clause was unconscionable. The LSC was alleged to have made a clear and unequivocal promise that it would not stand on formalities and the company claimed that it had relied on that promise to its detriment.

In dismissing the company's appeal, however, the Court noted that its arguments on appeal differed substantially from those it had put before the judge during an 11-day trial. The judge had dealt impeccably with the issues placed before him and the public interest in the finality of litigation precluded the company from putting forward what was effectively a new case on appeal.