no oral modification

15 January 2004

Jan Decorte

Commercial contracts often contain what is known as a “no oral modification” or a “NOM” clause. The aim of NOM clauses is to protect the parties to the contract against unintended modifications of the contract by unauthorised representatives and employees.

NOM-clauses can be very simple such as, for example, “No variation to this agreement shall be effective unless made in writing” or more sophisticated such as, for example, “No amendment or other variation of the Contract shall be effective unless it is in writing, is dated, and is signed by an authorised representative of each party.” NOM clauses are usually inserted as a typical boilerplate clause and not always with much thought as to their effect. Nevertheless, in practice, there sometimes appears to be confusion about the scope and enforceability of a NOM clause.

What is the effect of NOM clauses under Belgian law? The only legal instrument that does address the enforceability of NOM clauses is the United Nations Convention of 11 April 1980 on contracts for the International Sale of Goods (“CISG”) that was ratified by Belgium on 4 September 1996. According to Article 29.2° of CISG, “A contract in writing which contains a provision requiring any modification or termination by agreement to be in writing may not be otherwise modified or terminated by agreement. However, a party may be precluded by his conduct from asserting such a provision to the extent that the other party has relied on that conduct.

The purpose of Article 29.2° of CISG is to render NOM clauses fully enforceable with one exception, that is, if the parties did make an oral modification to the contract then one party may not rely on a NOM clause where the other party has relied on that oral modification. Article 29.2° of CISG applies to certain international contracts of sale of goods only.

However, on the basis of general principles of Belgian contract law one can argue that NOM clauses appearing in contracts that do not fall within the scope of CISG are also valid and enforceable. But, as with Article 29.2 of CISG, the benefit of a NOM clause would not be available to a party if it could be established that parties waived the benefit of the clause.

NOM clauses do not, therefore, give absolute protection against “oral” modifications of a contract. Parties to a contract should exercise caution in their dealings and be aware that their conduct could still result in a valid amendment to a contract notwithstanding that the contract contains an otherwise valid NOM clause.

Written by Jan Decorte and George Roox.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.