Commercial Law Monologues: No Oral Modification Clause: Is party autonomy to contract a one-way ticket?

No oral modification (“NOM”) clauses are boilerplate provisions, which require that in order to be effective, an amendment to a written contract must be made in writing, and signed by all the contracting parties.

At first glance, NOM clauses seem straightforward: they ensure clarity and prevent disputes over alleged oral variations to a contract. But they also raise a fundamental question that strikes at the heart of party autonomy to write and re-write contracts – Do parties get divested of their autonomy to re-write their own contract, either orally or by conduct, once they have subscribed to an NOM clause?  

The recent decision of the Supreme Court in Sepco Electric Power Construction Corporation v. GMR Kamalanga Energy Ltd., reported at 2025 SCC OnLine SC 2088 (“Sepco”) affirmed that NOM clauses are enforceable in India. However, the underlying theoretical principle of party autonomy to re-write a contract under the Indian Contract Act, 1872 (“ICA”), in view of an NOM clause was not engaged with, possibly because it did not arise during the course of submissions.

There is lack of uniformity in the jurisprudence of the United Kingdom (“UK”), Singapore and Australia regarding the enforceability of NOM clauses, when tested in light of the principle of party autonomy to re-write a contract, either orally or by conduct. The approaches range from a strict application of NOM clauses to an overriding deference to the principle of party autonomy. These approaches highlight the underlying tension between contractual certainty and the practical realities of commercial dealings.

United Kingdom

The UK Supreme Court’s decision in MWB Business Exchange Centres Ltd. v. Rock Advertising Ltd., reported at [2018] UKSC 24 (“Rock Advertising”), at paragraphs 12 to 16, adopted a strict approach towards enforcement of NOM clauses. The majority held that once parties have contractually agreed to an NOM clause, any oral variation would be ineffective unless it meets the contractually stipulated form. As Lord Sumption explained, “party autonomy operates up to the point when the contract is made, but thereafter only to the extent that the contract allows.”

He further explained “[t]he natural inference from the parties’ failure to observe the formal requirements of a No Oral Modification 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” and that “…the safeguard against injustice lies in the various doctrines of estoppel.”

According to the UK Supreme Court, the protection of an NOM clause may not be available to a party if that party, by its own unequivocal conduct, has led a counterparty to act to its detriment in a manner at variance with the written contract. However, because of the existence of an NOM clause, the threshold for the application of the doctrine of estoppel would be very high – requiring “something more” than a mere promise.

This reasoning was reaffirmed by the UK Supreme Court in Kabab-Ji SAL v. Kout Food Group, reported at [2021] UKSC 48, at paragraphs 67 to 69.

Lord Briggs, on the other hand, advocated a “… cautious recognition of the effect of a NOM clause, namely that it continues to bind until the parties have expressly (or by strictly necessary implication) agreed to do away with it, would give the parties most of the commercial benefits of certainty and the avoidance of abusive litigation about alleged oral variation for which its proponents contend.”

For example, Lord Briggs referred to a situation where “the orally agreed variation called for immediately different performance from that originally contracted for” as a case of necessity leading to the implication of an agreed departure from an NOM clause.

Similarly, Lord Briggs also referred to a situation where the persons responsible for the day-to-day performance of a business contract agree to some variation “blissfully unaware that the governing contract has, buried away in the small print of standard terms, a NOM clause inserted by diligent lawyers anxious to minimise the risk of litigation about its terms.” In that case, Lord Briggs held that it would be an “implied term that the NOM clause, of which they were unaware, was agreed to be treated as done away with.”

Singapore

The Singapore Court of Appeal adopted a view different than the one taken by the majority of the UK Supreme Court in Rock Advertising.

In Charles Lim Teng Siang v. Hong Choon Hau, reported at [2021] SGCA 43 (“Charles Lim Teng Siang”), at paragraphs 36 to 54, the Singapore Court of Appeal held “The test should be whether at the point when parties agreed on the oral variation, they would necessarily have agreed to depart from the NOM clause had they addressed their mind to the question, regardless of whether they had actually considered the question or not.” This approach elevates the parties’ most recent intentions over their earlier contractual commitments, giving primacy to the principle of party autonomy.

However, according to the Singapore Court of Appeal, the NOM clause raises a rebuttable presumption that in the absence of an agreement in writing there would be no variation of the contract.

Australia 

Closer to the approach of the Singapore Court of Appeal, in Australia, the Supreme Court of New South Wales has held in Mathews Capital Partners v. Coal of Queensland Holdings, reported at [2012] NSWSC 462 (“Mathews Capital Partners”), at paragraph 39, that “Such a provision would not exclude the effect of a subsequent implied or oral contract which varied the Amended Shareholders Agreement, if that contract were otherwise established; however, the fact that the clause exists is to be taken into account in interpreting the subsequent conduct of the parties, and it makes it more difficult to draw an inference that the parties did intend, by an oral agreement or by emails between their advisers, to vary the terms of the Amended Shareholders Agreement.”

Therefore, according to the Supreme Court of New South Wales, an NOM clause does not prevent oral or implied modifications, it merely makes such a conclusion less likely.

India

It appears from a reading of paragraphs 41 to 43, read with paragraph 52, of the decision of the Supreme Court of India in Joshi Technologies International Inc. v. Union of India and Others, reported at (2015) 7 SCC 728, that an argument regarding a possible amendment of the contract through certain letters exchanged between the parties after its execution was rejected primarily on the basis that the contract had an NOM clause.

A similar approach is evident from the decision of the Delhi High Court in Thyssen Krupp Materials AG v. The Steel Authority of India, reported at 2017 SCC OnLine Del 7997, at paragraph 72 and the decision of the Supreme Court in All India Power Engineer Federation and Ors. v. Sasan Power Limited & Ors., reported at (2017) 1 SCC 487, at paragraphs 12 to 16.

However, in these cases, the underlying theoretical principle of party autonomy to re-write a contract despite an NOM clause was not fully engaged with, possibly because it did not arise during the course of submissions.

Generally, Indian law recognises party autonomy to re-write contracts, either expressly or by implication [See Section 9 read with Section 62 of the ICA]. Therefore, at first blush, it is arguable that the approach of courts in India should be closer to the approach adopted by Singapore courts in Charles Lim Teng Siang.

However, Indian law recognises several exceptions to this rule as well, depending upon specific facts and circumstances. For example, in Kollipara Sriramulu v. T. Aswathanarayana and others, reported at (1968) 3 S.C.R. 387, the Supreme Court of India observed “… the next question raised in these appeals, namely whether the oral agreement was ineffective because the parties contemplated the execution of a formal document or because the mode of payment of the purchase money was not actually agreed upon. … … It is well-established that a mere reference to a future formal contract will not prevent a binding bargain between the parties. The fact that the parties refer to the preparation of an agreement by which the terms agreed upon are to be put in a more formal shape does not prevent the existence of a binding contract. There are, however, cases where the reference to a future contract is made in such terms as to show that the parties did not intend to be bound until a formal contract is signed. The question depends upon the intention of the parties and the special circumstances of each particular case.”

Additionally, Lord Sumption recognises formality and certainty as legitimate commercial reasons for strictly applying NOM clauses to prevent the possibility of abuse and raising of specious defences [See MWB Business Exchange Centres Ltd. v. Rock Advertising Ltd., reported at [2018] UKSC 24, at paragraph 12].

The principle of estoppel recognised in Rock Advertising as a basis for diluting the protection afforded by the NOM clause in the contract, has already been echoed by courts in India [See John Distilleries Pvt. Ltd. v. Brihan Maharashtra Sugar Syndicate Ltd., reported at 2019 SCC OnLine Bom 67, at paragraph 6 and Sepco Electric Power Construction Corporation v. GMR Kamalanga Energy Ltd., reported at 2025 SCC OnLine SC 2088, at paragraph 86].

It is, therefore, equally likely that courts in India will lean in favour of an underlying theoretical principle that restricts party autonomy to re-write a contract, by the strict application of an NOM clause that the parties have themselves agreed to, based on the approach adopted by the UK Supreme Court in Rock Advertising. It is possible that in addition to the reasons recognised in Rock Advertising for strict application of NOM clauses, courts in India will find additional reasons to do so, specific to the Indian context.

Gaurav Pachnanda is a Senior Advocate, based in New Delhi, whose practice includes a wide range of commercial litigation, international commercial arbitration and intellectual property litigation.

He is also a Barrister at Fountain Court Chambers, London.