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December 2007

Oral Variations

Real Estate Agreement – written terms – subsequent oral variations – reliance on varied terms – varied contracting enforceable

A recent decision from the Court of Appeal highlights the dangers of oral variations to written agreements.

In this particular case the Vendor and the Purchaser signed a property agreement which provided for set date instalment payments including a final instalment date (“the settlement date”). Subsequently, the Purchaser requested some flexibility in the payment dates which the Vendor orally agreed to. The Vendor assured the Purchaser that there was no need to alter, in writing, the settlement date.

The Vendor accepted the instalment payments made by the Purchaser but when the Purchaser did not make payment of the final instalment on the settlement date the Vendor attempted to cancel the agreement. The Purchaser argued that the Vendor was stopped from enforcing the strict terms of the agreement as to the payment of the final instalment.

The Court held that in light of the latitude that had existed in respect of earlier payments for which finite dates were provided (but not adhered to by the purchaser without complaint from the vendor) and the relationship between the parties, there was nothing unreasonable or improper about the arrangement. On that evidence, it was open to the Court to determine that the assurance had been given as to flexibility in payment dates and was reasonably relied upon by the Purchaser, and such arrangement did not infringe the statutory requirements for the disposal of an interest of land to be in writing.

The Court held that it was not open for the Vendor to orally agree to flexibility with payments and then go back to reliance upon the written agreement by insisting that the final payment be made on the original settlement date. If the Vendor had wished to rely on the terms of the written agreement the Vendor should never have entered into an oral agreement to vary the terms. 
The message is don’t make oral arrangements where there is an existing written agreement without consulting with us first.