Key takeaway

The High Court in GSY Hospitality Ltd v Gladstone Court Developments Ltd [2025] EWHC 3231 (TCC) has delivered an important judgment that draws attention to the legal treatment of informal or oral agreements to vary written contracts.

This case matters, not because it treads any new ground in law, but because it reiterates the importance of writing down informal agreements or handshake deals.

Factual background and the no oral modification clause

The Claimant, GSY was the purchaser of a leasehold property from the Defendant Gladstone Court Developments Ltd (“GCD”). The agreement was referred to as a Sale and Purchase Agreement (“SPA”). As part of the SPA, GCD were to carry out construction works to fit out the property as a luxury hotel. The SPA contained express terms prohibiting modifications to the agreement by way of oral agreement. These clauses are referred to as no oral modification (“NOM”) clauses.

In 2017, the parties agreed to vary the number of hotel rooms that were to be fitted out and the scope of related works by way of a written Variation Agreement. The Variation Agreement also apportioned construction costs between the parties. As the Variation Agreement was in writing, it was valid and enforceable. Read more in our article on drafting contracts.

The alleged oral variation and dispute

Sometime after 2017, the GCD alleged that a further variation took place, but this time a variation that was only agreed orally between the parties. Eventually, this variation led to dispute, as GSY alleged that the oral agreement never took place, and even if it did, that it was unenforceable due to the NOM clause in the SPA. The SPA required any dispute to be resolved by way of expert determination. Expert determination is a dispute resolution mechanism where the parties appoint a private person who is an expert in their field to neutrally resolve any dispute. Parties usually agree that the outcome of this process is binding, subject to specific exceptions: errors of law, or manifest error on the part of the expert. This was the case in this dispute.

At the expert determination, GCD managed to convince the expert both that the oral agreement happened, and that it was binding on the parties, meaning that GCD’s liability for construction costs was capped at £800,000.

High Court decision on the no oral modification clause

As a result, GSY brought an application for summary judgment in the High Court, claiming that the expert had been wrong both as a matter of fact and as a matter of law. GSY relied on the fact that any oral agreement must have postdated the SPA, and thus was unenforceable due to the NOM clause, as well as other entire agreement clauses contained within the SPA.

The High Court found in GSY’s favour after reviewing case law on the enforceability and interpretation of NOM clauses, as well as the power of the Court to overturn expert determinations.

GSY argued that as the oral agreement had not been evidenced as required by the SPA, it could not be enforced. Had the oral agreement been later transposed into writing, there is a chance that such agreement would be enforceable. The SPA’s drafting was very clear that variation must be made in writing, which left the Court little choice but to overturn the finding of the expert.

MWB v Rock Advertising and no oral modification clauses

The Court also considered recent guidance from the Supreme Court in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24; [2019] AC 119. This judgment is the authority for NOM clauses, reinforcing that they are enforceable. The act of making an oral agreement is not a breach of contract, but instead is simply unenforceable. As such, Courts can enforce NOM clauses in standard contracts.

As this was a hearing for summary judgment, the Court did not consider any wider issues other than the narrow dispute concerning the NOM clause. Had the matter proceeded to a full hearing, GCD may have been able to rely on arguments surrounding estoppel, had they proved that they had relied on the oral agreement to their detriment.

Why no oral modification clauses matter

Here, the High Court reinforced that where a contract contains a strict “no oral modification” clause, an informal arrangement may carry little or no legal weight unless it is recorded in the form the contract requires.

This decision is a practical warning for anyone running projects where terms evolve quickly. Parties often agree cost caps, scope changes or commercial “fixes” in meetings and then carry on as if the contract has been updated. That creates real risk: a business may price a deal, approve payments or allocate contingency on the assumption that a cap or variation applies, only to find later that it is unenforceable.

The case is also a reminder that dispute mechanisms are not fail-safe. Even where parties use expert determination, a determination may be vulnerable if the expert fails to grapple with key legal constraints in the contract. The takeaway is simple: document variations promptly, and audit dispute clauses to ensure they deliver the certainty you expect.

Please contact the Commercial Litigation team at Barnes Law for advice on contract disputes.

Written by Barnes Law Managing Partner Yulia Barnes.

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