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Written Contract Trumps Oral Informality

Where a commercial contract specifically stated that it included all the terms that had been agreed between the parties, arguments that further provisions had been added by implication or in the course of informal oral communications could not succeed, the High Court has ruled.

WarehouseCompany A had been contracted to provide warehousing, packaging, distribution and storage services to company B. The written contract did not state that company B would use company A as its sole provider of the relevant services. Company A argued, however, that an exclusivity term was incorporated in the contract by reason of the parties’ subsequent conduct and words spoken in a telephone call.

Company A submitted that company B’s breach of the alleged exclusivity clause had entitled it to terminate the contract. Company A claimed over £120,000 damages for alleged breaches of contract during the operational period of the agreement and in respect of lost profits up to the date on which the contract would otherwise have ended.

In dismissing company A’s claim, however, the Court found that company B had never orally communicated its acceptance that the contract would be exclusive. Even had there been such an oral agreement, it lacked sufficient certainty to be contractually binding.

The parties had intended to govern their relationship formally, in writing, and the Court found that the presence of an ‘entire agreement clause’ in the contract – which stated that the document embodied all the terms agreed – was in any event fatal to company A’s claim.