When 'sorting it out' becomes a legal risk

Organisations managing commercial contracts face a daily tension: the need to be responsive and agile when managing live contracts on the ground, while maintaining clear documentation, and  adhering to formal change control procedures. For public sector bodies, this tension is heightened by the dual demands of rigorous governance and transparency.

That tension, left unmanaged, creates what practitioners call "drift" - and drift can prove enormously costly when supplier performance deteriorates and enforcement becomes necessary.

The reality of day-to-day contract management

No contract, however carefully drafted, perfectly anticipates every operational development. Requirements evolve, personnel change, and commercial pressures demand swift decisions. In the public sector, this challenge is amplified by the need to operate within standing orders, rules of delegation, and internal governance frameworks. These safeguards exist for good reason - they protect the public purse and ensure accountability under the Procurement Act 2023 - but they can feel cumbersome in the moment.

The temptation to "sort it out informally" is entirely understandable. Over time, however, a series of small informal accommodations — adjusted delivery timelines, uncosted additional scope, and tolerated under-performance — can mean the live commercial relationship bears little resemblance to the signed contract documentation.

Formality matters: The "No oral modification" clause

Many commercial contracts contain "no oral modification" clauses, requiring any variation to be made in writing and signed by authorised representatives.

The significance of such provisions was confirmed by the Supreme Court in Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24. MWB sought to enforce an oral agreement to reschedule licence fee payments, notwithstanding a written contract prohibiting anything other than written variations. The Supreme Court held unequivocally that such clauses are legally effective: an oral agreement to vary the contract, even one genuinely reached between the parties, will not be binding. The practical message is stark - informal arrangements, however commercially sensible in the moment, may simply carry no legal weight, leaving original contractual obligations technically intact.

The entire agreement clause

Allied to this is the "entire agreement" boilerplate found in virtually all commercial contracts. Such a clause provides that the written contract constitutes the complete agreement between the parties, superseding all prior negotiations, representations, and understandings. Where a contracting party has relied upon assurances given during negotiations/procurement, or upon side-letters, emails, or meeting notes supplementing the formal documentation, an entire agreement clause can extinguish any legal reliance upon them. Businesses should therefore treat the signed, conformed contract as the definitive and authoritative record - updated promptly to reflect each formally agreed variation.

Waiver: The risk of losing rights through inaction

Perhaps the greatest risk associated with drift is waiver. At common law, a party that, with knowledge of a breach, elects (knowingly) to affirm the contract rather than terminate may then lose that right of termination permanently: see Peyman v Lanjani [1985] Ch 457. More broadly, the equitable doctrine of promissory estoppel - established in Hughes v Metropolitan Railway Co [1877] 2 App Cas 439 - means that a party who, by conduct, leads the other to believe it will not enforce its strict legal rights may be precluded from later doing so without reasonable notice.  In practice, where poor performance has been repeatedly tolerated without formal objection, a counterparty may argue that rights to terminate for breach have been waived or at least suspended.

The conformed contract: Your most important document

When performance becomes unacceptable, having an accurate, up-to-date conformed contract document is essential. Establishing whether poor performance constitutes a material breach justifying termination, or whether it attracts liquidated damages or other contractual compensation, requires a precise contractual baseline. A contract drifted far from operational reality is of very limited utility in enforcement or dispute proceedings.

Practical recommendations

The key priority for a contracting party is to ensure that day-to-day contract management does not undermine their legal and commercial positions. In practice, this means embedding clear processes, and acting promptly when issues arise, as well as:

• Processing all variations through formal change control and update the conformed contract accordingly.
• Applying governance processes and delegation authorities consistently.
• Issuing formal notices of breach promptly.  As a minimum document (e.g. in governance meetings) dis-satisfaction and what steps are expected in relation to improvement -  prolonged inaction carries waiver risk.
• Expressly reserving rights when allowing time for performance to improve, making clear that no waiver is intended and that contractual remedies remain available.
• Conducting regular contract reviews to identify and correct drift before it becomes entrenched.
• Treating the entire agreement clause as a discipline: if it matters commercially, ensure it is captured in writing within the contract.

To learn more about addressing supplier underperformance and contractual disputes, visit our Navigating supplier performance hub. Here, we share insights into managing the contract lifecycle more effectively: protecting your position, mitigating risk, and unlocking future opportunity.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2026.  For more information see our terms & conditions.