Charles Lim v Hong Choon Hau

In Charles Lim Teng Siang v Hong Choon Hau,1 the Singapore Court of Appeal (“SGCA”) considered whether an oral modification can be effective in the face of a “No Oral Modification” (“NOM”) clause. The SGCA’s discussion of this issue was obiter; it was held on the facts that the alleged oral rescission at the centre of the dispute was, as a matter of definition, not a contractual modification and hence did not attract the operation of the parties’ NOM clause.2 Nevertheless, the SGCA proceeded to express a “provisional view” as regards the legal effect of NOM clauses.3 The SGCA’s discussion is significant for (i) helpfully clarifying the legal effect and practical utility of NOM clauses; and (ii) its consideration of the UK Supreme Court’s decision in MWB Business Exchange Centres Ltd v Rock Advertising Ltd,4 in which alternative approaches were proposed separately by Lord Briggs and Lord Sumption (respectively, the “Briggs approach” and “Sumption approach”).

The SGCA held that an NOM clause does not prevent parties from orally modifying their contract. Instead, such clause “merely raises a rebuttable presumption that, in the absence of an agreement in writing, there would be no variation”.5 The party alleging an oral modification may in turn rebut this presumption by adducing “more cogent” evidence that proves, on a balance of probabilities, that such oral agreement exists and parties intended to be bound thereto.6 The SGCA held that this approach is well founded on the party autonomy principle as expressed by Cardozo J in Beatty v Guggenheim Exploration Co,7 that “[t]he clause which forbids a change, may be changed like any other. … Whenever two men contract, no limitation self-imposed can destroy their power to contract again”.