Varying the terms of a multi-party contract
Where there is a multi-party contract, can select parties to that contract vary, as between themselves, their rights and obligations under such contract without also obtaining the consent of all other parties? The likely short answer is: sometimes.
In Mirabela Nickel Ltd (in liq) (recs and mgrs app’d) v Mining Standards International Pty Ltd,[1] the Court of Appeal of Western Australia recently had cause to consider that question. The facts involved an asset-sale agreement, pursuant to which vendors were to sell, among other things, loans owed to one of them by another company (‘Brazil Co’). Brazil Co was expressly named as a party to the agreement. The agreement featured a finance condition precedent which permitted a ‘party’ to terminate the agreement if finance was not obtained within 14 days of execution. The question was whether the vendors and buyer were free to vary that term without Brazil Co’s consent.
At trial, the buyer sought to impugn any variation agreed with the vendors on the basis Brazil Co had not agreed to it. (Brazil Co, for its part, was not a party to the proceeding and did not make any allegations in respect of the variation and its validity.) The trial judge accepted the buyer’s case, finding that Brazil Co’s consent to the variation was necessary and that any purported variation made by the vendors and buyer was null. On appeal, the vendors challenged this finding.
In joint reasons, Buss P, Mitchell and Vaughan JJA considered what appeared to be limited Australian authority on the question of the ability of select parties to a multi-party agreement to vary terms between themselves.[2] Their Honours also considered two English cases: one from 1896 and the other from 2000. In the latter case, Raja v Rubin,[3] Peter Gibson LJ (with whom the other members of the bench in that case agreed) said:
Why should all those whose interests are affected not be free to agree an alteration to their rights and liabilities? Like the judge, I can see no sensible reasons … Here, in my judgment, the position is no different from that which obtains under the general law where there is a multilateral contract. It is always open to some of the parties to agree a variation of their rights as between themselves if they can do so without affecting the rights of the other parties.[4]
The Court of Appeal in Mirabela endorsed those comments, considering them to be ‘consistent with the general principles applying to the variation of contracts as well as the basic notion of freedom of contract’.[5] That said, their Honours noted there were ‘limitations’ to the freedom of parties to a multi-party agreement to vary terms between themselves. Such limits would include that:
‘a purported variation cannot affect the rights or obligations of a party to the multi‑party agreement, in respect of that agreement, if that person is not a party to the further agreement’; and
possibly, variation is not permissible where ‘the structure and operation of a transaction results in a requirement that each party to the original agreement must agree to a modification to the agreement (although this latter limitation may be no more than a specific instance of the former limitation)’.[6]
Their Honours also noted the potential for conflict or inconsistency between a multi-party contract on the one hand and, on the other, the contract which effectively would be formed by the agreement of the relevant, select parties to the multi-party contract. In GB Energy Ltd v Protean Power Pty Ltd, the Supreme Court of Western Australia held:
There may be cases in which the exercise of the rights and obligations of the parties who had agreed to a variation of the original contract would be inconsistent with the exercise of their rights and obligations under the original contract in relation to the parties to the original contract who are not parties to the contract of variation. Such a case would give rise to difficulties in determining the effect of the contract of variation. However, where there is no such inconsistency there is no reason why the contract of variation may not be effective as between the parties to it.[7]
Applying those principles (and limits) to the facts at hand, their Honours found that although Brazil Co was a ‘party’ to the agreement — which would, prima facie, have required its consent to a variation of the termination clause — the right to terminate, properly construed, was conferred only on the vendors and buyer. There also was ‘no scope for any inconsistency of the kind mentioned in [GB Energy]’.[8]
As such, because variation to the rights and obligations regarding termination did not affect the rights and obligations of Brazil Co as a party to the multi-party agreement, it was open to the vendors and buyer to vary such rights and obligations without obtaining Brazil Co’s consent. The purported variation therefore was valid.
What about the commonplace ‘no variation’ clause?
The multi-party agreement contained a commonplace type of clause which provided that the agreement ‘may only be varied by a document signed by or on behalf of each party’. No party had sought to rely on this clause on appeal (and, as noted earlier, Brazil Co did not intervene), and nor did any party challenge the conclusion of the trial judge in saying:
Even where there is a clause in a contract requiring any amendment to be writing, a contract can be varied by later agreement. As a consequence, it is possible for a later oral or implied contract to be enforceable notwithstanding the existence of a clause in the original agreement requiring any variation to be in writing. However, the party seeking to avoid the operation of [such] a clause … must make out a contract to vary.[9]
[1]: [2025] WASCA 82.
[2]: See the discussion at ibid [219]–[259].
[3]: [2000] Ch 274.
[4]: Ibid 287.
[5]: Mirabela Nickel Ltd (in liq) (recs and mgrs app’d) v Mining Standards International Pty Ltd [2025] WASCA 82, [234].
[6]: Ibid [235].
[7]: [2009] WASC 333, [80], quoted in Mirabela Nickel Ltd (in liq) (recs and mgrs app’d) v Mining Standards International Pty Ltd [2025] WASCA 82, [222].
[8]: Mirabela Nickel Ltd (in liq) (recs and mgrs app’d) v Mining Standards International Pty Ltd [2025] WASCA 82, [253].
[9]: Mirabela Nickel Ltd (in liq) (recs and mgrs app’d) v Mining Standards International Pty Ltd (No 5) [2023] WASC 62, [516], citing among others GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1, [213]–[223] (Finn J).