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verbal agreement

Can you legally rely on a person’s word only instead of a written change in an agreement?

This was the simple inquiry we got the other day.

“Are oral variations of an agreement valid?”

 To illustrate let us take an example:

If, for example, you agree to rent a house from a friend of yours for a fixed period of two years.

You both furthermore agree that you should enter into a written lease agreement and you have a written lease drawn up properly.

Everything goes well until the monthly rental increases come into effect as per the written lease agreement at the end of the first year.

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?

The above is a simple example of a verbal agreement entered into after the conclusion of a written agreement.

The question is how binding is this oral agreement which has the effect of varying the terms of the original written lease agreement.

Contracts govern the relationship between parties entering into any valid legal transaction and exist to achieve certainty and avoid disputes which may arise in the future.

The contracting parties can therefore 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 force or effect unless it is reduced to writing and signed by both parties. These are pretty standard clauses in almost all written agreements. This type of clause was tested in the case of Xtraprops 66 (Pty) Ltd v Phiopater Supplies (Pty) Ltd.

In this case; the applicant, Xtraprops 66 (Pty) Ltd, applied for the eviction of the respondent, Phiopater Supplies (Pty) Ltd, which was in arrears with its rentals for a business premises 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 the 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, hearing the matter, 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 the terms 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, the Court found for the applicant; since the parties, in this case, had elected to have a non-variation clause in the lease agreement, and they had 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 terms of the contract.

If the contract does not expressly make provision for any variations to be reduced to writing and signed by both parties, then verbal variations may well be valid and enforceable, although it will still 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 to prove; as it could be disputed by the other party.

It is therefore always safer to play it smart and ensure your variations to any agreement are recorded in writing and signed by both parties.

Please visit our website at www.legaladviceoffice.co.za or send us an email to This email address is being protected from spambots. You need JavaScript enabled to view it. with your legal questions.

About our author:

Hugh Pollard (Legal Consultant), has a BA LLB and 42 years’ experience in the legal field. 22 years as a practicing attorney and conveyancer; and 20 years as a Legal Consultant.

082-0932304 (Hugh’s Cell Number)

This email address is being protected from spambots. You need JavaScript enabled to view it.

www.legaladviceoffice.co.za

 

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