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Litigating Contracts with “No Oral Modification” Clauses

Many breach of contract cases in Tennessee involve written contracts which contain what I refer to as “no oral modification clauses.” Although the language of these types of clauses differs, they usually say something like this: “This Agreement may not be amended, modified, changed or extended except by a written instrument signed by both parties.”

There is also a statute in Tennessee, T.C.A. §47-50-112(c), which directs that, if a contract contains “a provision to the effect that no waiver of any terms or provisions thereof shall be valid unless such waiver is in writing, no court shall give effect to such waiver unless it is in writing.”

Especially given the above statute, if two parties in a breach of contract case are litigating a case with a written contract which contains a clause disallowing oral modifications or changes, it would be impossible for one of the parties to prove that the contract had, in fact, been orally modified, right? Wrong. In fact, it happens all of the time.

Here is a summary of cases not upholding and upholding no oral modification clauses:

CASES HOLDING WAIVERS, AMENDMENTS AND MODIFICATIONS EFFECTIVE EVEN THOUGH CONTRACT CONTAINED CLAUSE REQUIRING CHANGES TO BE IN WRITING

Realty Shop, Inc. v. RR Westminister Holding, Inc., 7 S.W.3d 581 (Tenn. Ct. App. 1999): Court discusses T.C.A. §47-5-112(c) at length and holds that parties waived the contract clause requiring change orders to be in writing.

Tidwell v. Morgan Building Systems, Inc., 840 S.W.2d 373 (Tenn. Ct. App. 1992): Contract provided that modifications had to be in writing. Court held that parties rescinded that clause by their course of conduct.

Moore Construction Co., Inc. v. Clarksville Dept. of Electricity, 707 S.W.2d 1 (Tenn. Ct. App. 1985): Contract clause requiring that all change orders be in writing was waived by the parties’ course of dealing.

V.L. Nicholson v. Transcon Investment and Financial Ltd., Inc., 595 S.W.2d 474 (Tenn. Ct. App. 1980): Contract required change orders to be in writing.  Court held express contract was not modified, and plaintiff could not recover damages under express contract.  Court held that course of parties’ dealings, however, created an implied-in-fact contract pursuant to which plaintiff could recover.

Birdwell v. McKinney, 1997 WL 773730, No. 01A01-9701-CV-00023, Court of Appeals of TN., Dec. 17, 1997: Contract contained provision that all modifications had to be in writing. Court held that the provision was waived by the parties’ course of conduct.

Hardin Const. Group, Inc. v. KSI Real Estate Enterp., 1991 WL 114833, Court of Appeals of TN., July 1, 1991: Owner estopped to enforce contractual requirement that change orders be in writing.

CASES HOLDING THAT CONTRACT CLAUSE REQUIRING MODIFICATIONS TO BE IN WRITING WERE EFFECTIVE

Crye-Leike, Inc. v. Carver, 415 S.W.3d 808 (Tenn. Ct. App. 2011): Real estate contract between seller and real estate agency provided that any amendments had be in writing and signed by the parties. Contract provided that real estate agency had a six month exclusive listing. The agreement expired one day before the eventual purchasers were shown the property. The real estate agency argued that the parties had orally agreed to extend the listing period.

Court notes that waiver must be proven by the party raising it and “by clear, unequivocal and decisive act of the party, showing a purpose to forgo the right or benefit which is waived.” citing, GuestHouse Intern, LLC v. Shoney’s N. Am. Corp., 330 S.W.3d 166, 202 (Tenn. Ct. App. 2010).  Court finds that real estate agency failed to show by a preponderance of the evidence that seller had waived the contractual provision requiring amendments to be in writing.

W.O. Const. Co., Inc. v. City of Smithville, 577 S.W.2d 920 (Tenn. 1977): Contract provision required that extra work had to be approved by the owner in writing.  Court upholds it on the basis that there were no facts alleged showing waiver or modification.

P & M J. Bannon v. Jackson, 117 S.W. 504 (Tenn. 1908): Contract contained requirement that no work considered extra would be paid unless the architect signed a change order.  Court recognizes that it would have been possible for the provision to have been waived, but finds that it was not under the circumstances.

The Hardison Law Firm, P.C. v. Howell, 2003 WL 22718427, No. W2002-01945-COA-R3-CV, Nov. 17, 2003: Lease contained language prohibiting amendment unless it was in writing signed by both parties.  Defendant’s argument that the plaintiff was estopped to rely on the clause held to fail as a matter of law.