Especially surprising is the fact that many attorneys (who have taken a class called “contracts” in law school) are unsure of the answer; many use similar language in representation agreements with clients, thinking such language will bar oral modification of the agreement. So does it?
The answer is no.
In reality, a written contract (except for sale of goods) may be modified orally in Pennsylvania despite language to the contrary in the parties’ original written agreement.
Does this mean it is easy to modify a written contract that precludes oral modification?
The answer again — no.
The party seeking to show such modification must prove a “clear intent” by the Parties for modification. In Somerset Community Hosp. v. Mitchell & Associates, 685 A. 2d 141 (Pa. Super. 1996), the Superior Court opined:
A written contract which is not for the sale of goods may be modified orally, even when the written contract provides that modifications may only be made in writing. Universal Builders, Inc. v. Moon Motor Lodge, Inc., 430 Pa. 550, 244 A.2d 10 (1968). An agreement that prohibits non-written modification may be modified by subsequent oral agreement if the parties’ conduct clearly shows the intent to waive the requirement that the amendments be made in writing. Accu-Weather v. Prospect Communications, 435 Pa.Super. 93, 644 A.2d 1251 (1994). An oral contract modifying a prior written contract, however, must be proved by clear, precise and convincing evidence. Pellegrene v. Luther, 403 Pa. 212, 169 A.2d 298 (1961).
The last part of the above quote is particularly important: clear and convincing evidence is needed to prove mutual intent to modify the contract. Each case must be viewed on its own facts.
In Somerset Community Hospital, above, there was abundant evidence of intent to modify: there were minutes (notes) of corporate meetings where modification was discussed, plus the parties had exchanged correspondence and actually behaved (through their conduct) that the contract had been modified. With all those fact clear from the record, it was determined that a modification had occurred.
How does this come up in real life?
Let’s say, for example, you hired a lawyer and your engagement letter with the attorney provided that (1) you must pay $250 per hour for representation, and (2) this agreement can only be modified in writing. But later on, you and your lawyer determine orally (or “verbally,” as some incorrectly characterize an oral understanding) such that an hourly fee no longer makes sense, because you agreed to pay a flat fee for each stage of representation. This new agreement for flat fee representation is so you don’t have cringe every time you open a monthly invoice from your lawyer, wondering whether you can afford the bill.
The above modification may be enforceable if you and lawyer had a clear understanding to modify the agreement (or there was waiver of the need for a writing). This can be shown through through oral testimony, or through emails, texts, and the parties’ conduct if, for example, your lawyer stops sending you monthly invoices, after having regularly invoiced you each month.
Remember that “clear and convincing evidence” is a fairly high standard. It gives discretion to the fact finder in terms of weighing the admissible evidence, and it can be very time consuming and expensive to get evidence of a modification before a fact finder.
Therefore, obviously, as a matter of common sense, it is always advisable to get your oral understanding reduced to a writing, or at least a text or email confirming it, because it is much more efficient to prove a text or email than to prove each parties’ subjective “intent.”
Additionally, if you are wrong about the contract being modified orally, then you could be found in breach of the agreement, yourself, by acting according to a modification that is not valid.
You should talk to a Pennsylvania lawyer about whether the evidence in your case in PA supports the finding that the contract at issue was modified.
If you have any question about contract law litigation, our Pittsburgh contact law lawyers offer a courtesy initial consultation where we answer a question or two.
