Although there any many terms you regularly find in agreements, the so-called Non-Variation clause is certainly one of the most common. These clauses may be worded differently, but the essence thereof is always the same: any amendment made to an agreement must be in writing, and singed by the parties, for it to have any legal effect.
This principle was first addressed in the seminal case of SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren, which was later confirmed by the Supreme Court of Appeal. Practically speaking, this principle can have serious consequences. If two people entered into a sale agreement containing a non-variation clause and later, verbally, agree that the purchase price should be increased, then this variation may have no legal effect. One party will be prejudiced hereby and the other advantaged.
At first it may seem strange to have a clause that prohibits parties from amending the terms of their agreement verbally. Why then would you include such a term in an agreement?
In short, the purpose of the clause is ‘certainty’. When the agreement, all addendums and variations are in writing and signed by the parties, there is no room for confusion or uncertainty. All parties know exactly what the terms are of their agreement. As soon as we allow verbal amendments, you risk one party averring amendments which may be denied by the other. This in turn will lead to lengthy litigation to determine the true terms of the agreement.
This clause is accordingly very important in any agreement and its purpose is sensible. It is however essential that every person who enters into an agreement with such a clause needs to understand how to use this clause and the effects thereof. Not being mindful of this clause may cause serious prejudice to a party and may even allow others to take advantage.
Although the courts have noted certain exceptional circumstances where the Shifren principle will not be enforced, such as public policy considerations, for the most part the non-variation clauses remain as valid and needs to be carefully considered by contracting parties.
If you have an agreement with which you need assistance, please consult your attorneys immediately. Acting preventatively may save you the expense of litigation at a later stage.