A general contractor enters into a contract with a landowner to build a commercial building. The contract contains a clause stating, 'This agreement may not be modified or terminated orally. Any modification must be in writing and signed by both parties.' During construction, the landowner orally requests a minor change to the interior layout, which the contractor agrees to perform. After completion, the landowner refuses to pay for the change, citing the 'no oral modification' clause. Under common law, is the landowner likely correct?
- AYes, unless the contractor can prove that the landowner waived the 'no oral modification' clause by their conduct.
- BYes, because the 'no oral modification' clause is strictly enforced, preventing any oral changes.
- CNo, because parties are generally free to modify a contract orally, even if it contains a 'no oral modification' clause.
- DNo, because the change was minor and therefore did not require a written modification.
Show answer & explanationAnswer & explanation
Correct answer: C. No, because parties are generally free to modify a contract orally, even if it contains a 'no oral modification' clause.
Under common law, a 'no oral modification' clause is generally not strictly enforced. Parties who have the power to enter into a contract also have the power to modify or rescind it, even orally, if they mutually agree. The act of orally agreeing to the modification can be seen as an oral waiver of the 'no oral modification' clause itself.
Why the other options are wrong
- A. While waiver by conduct is a possibility, the stronger common law rule is that parties can orally modify regardless of the clause, unless the Statute of Frauds applies.
- B. This is generally true under the UCC for contracts for the sale of goods, but not under common law for service contracts.
- D. The materiality of the change is irrelevant to the enforceability of the 'no oral modification' clause itself under common law.
No Oral Modification Clause (Common Law)
A contract provision stating that the agreement can only be modified in writing. Under common law, such clauses are generally not strictly enforced, and parties can still orally modify the contract.
- Common law position: parties can orally waive or modify the clause itself.
- UCC position (for goods): generally enforces 'no oral modification' clauses unless waived by conduct.
- Oral modification must still meet contract formation requirements (e.g., mutual assent, consideration or a substitute).
Memory trick: Written words say 'no talk,' but under common law, you still can walk.