Introduction

Contractual certainty is indispensable to modern commerce. It enables businesses to allocate risk, plan strategically and, ultimately, rely on the enforceability of their agreements. In cross-border markets such as Cyprus—where English case law remains highly persuasive and influences the interpretation of the Contract Law, Cap. 149—the principle of freedom of contract continues to dictate commercial outcomes.

Recent decisions of the UK Supreme Court confirm that contracting parties remain free to determine not only the content of their agreement, but the mechanisms by which obligations may be varied and enforced. The Court’s restrained approach affirms that judicial intervention is exceptional, preserving autonomy and predictability in commercial arrangements.

The Current Position

Under modern English law—and by analogy Cypriot legal culture—courts interpret commercial agreements according to their express language, informed by circumstances known to both parties at the time of contracting. Doctrines such as illegality, fraud, mistake and duress remain relevant safeguards; however, a consistent judicial stance has emerged: contracts will not be altered simply because one party later regrets the bargain or finds performance inconvenient. This approach aligns with Cap. 149, principles on freedom of contract and interpretation, where the courts aim to uphold the parties’ intention so far as legislation permits. Recent UK Supreme Court jurisprudence provides further clarity.

Rock Advertising

Rock Advertising[1] considered whether an oral variation of contractual payment terms could be enforceable despite a no oral modification (NOM) clause requiring written amendments. The Supreme Court held that such a variation was invalid, affirming the parties’ right to impose procedural safeguards on contractual changes. The ruling reinforces the view that where parties have agreed on a particular method of amendment—for example, by written instrument—the courts will expect them to follow it.

From a Cypriot standpoint, the decision is particularly persuasive. It reinforces evidential clarity and reduces the scope for opportunistic claims based on alleged unwritten promises.

The Supreme Court’s reasoning promotes clarity and reduces uncertainty by preventing reliance on alleged oral promises that conflict with written provisions. It underlines that contractual freedom encompasses the ability to restrict future modification to a specified format.

Indeed, the Nicosia District Court recently applied Rock Advertising in a successful summary-judgment application[2], holding that the agreement in question could not be amended orally where a NOM clause existed.

For lawyers in Cyprus engaged in drafting and advising on commercial agreements, the case provides a clear warning: where NOM clauses exist, parties must ensure all variations are formally documented.

The decision also encourages businesses to implement internal procedures that guard against informal amendments.

RTI v MUR

RTI v MUR Shipping[3] examined the scope of a contractual obligation to use “reasonable endeavours” within the context of a force majeure clause.

The case concerned a force majeure clause requiring parties to use “reasonable endeavours” to overcome impediments to performance. Sanctions had made payment in U.S. dollars impossible, and the charterer proposed to pay in euros, offering to bear any conversion loss. The shipowner refused and invoked force majeure.

The Court held that the owner was not required to accept non-contractual performance. “Reasonable endeavours” oblige the parties to attempt performance as contractually agreed—not to accept an alternative form of performance.

This is particularly relevant for Cyprus-based businesses involved in international trade, where sanctions and payment-flow complications may arise.

The decision confirms that force majeure provisions are not a gateway for redefining contractual rights. They operate within the four corners of the contract. The Supreme Court’s reasoning aligns with Cypriot doctrine under Cap. 149, which requires performance as promised unless the contract expressly provides otherwise.

Commercial parties should carefully consider the level of flexibility they require when structuring force majeure provisions. If alternative performance is intended to be acceptable, this must be expressly stated. Absent such language, a party may insist on strict compliance.

Cavendish Square Holding BV v Talal El Makdessi (2015)

It could be said that Cavendish v Makdessi[4] revolutionised the law on contractual penalties.

The UK Supreme Court considered the enforceability of contractual clauses linked to a share sale and shareholders’ agreement. The seller had agreed to restrictive covenants and, if breached, would forfeit deferred consideration and be compelled to sell his remaining shares at a pre-agreed valuation. The central question was whether these provisions constituted unenforceable penalty clauses. The Court concluded that the clauses were not penalties, noting that they functioned as part of the commercial price mechanism and were designed to protect the legitimate business interests of the purchaser, particularly goodwill.

In the related appeal, ParkingEye Ltd v Beavis, the Court examined whether an £85 parking charge for overstaying a two-hour free parking period amounted to a penalty. Whilst the driver argued it was excessive and unenforceable, the Court held that the charge served a legitimate business purpose—ensuring regular turnover of parking spaces—and was not disproportionate. Accordingly, it was enforceable.

As far as the penalty rule is concerned, the UKSC, inter alia, noted:

“The penalty rule is an interference with freedom of contract. It undermines the certainty which parties are entitled to expect of the law. Diplock LJ was neither the first nor the last to observe that “The court should not be astute to descry a ‘penalty clause’”: Robophone at p 1447. As Lord Woolf said, speaking for the Privy Council in Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, 59, “the court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld”, not least because “[a]ny other approach will lead to undesirable uncertainty especially in commercial contracts”.”

These decisions reinforce a principled and commercial approach to contract enforcement. The Supreme Court departed from the previous rigid focus on whether a clause reflected a genuine pre-estimate of loss and instead emphasised whether the provision in question protects a legitimate interest and is proportionate to that purpose. While the penalty rule was not abolished, the Supreme Court confirmed that its scope is now carefully confined. In practice, this represents a significant affirmation of freedom of contract, particularly in negotiated commercial arrangements. The rulings promote certainty by signalling that courts will generally uphold carefully drafted contractual mechanisms — even where they impose significant consequences — provided they serve a legitimate aim and are not out of proportion.

Provisions previously vulnerable to challenge as “penal” are now more likely to withstand scrutiny if they reflect genuine commercial aims.

For Cypriot lawyers, Cavendish underscores the importance of explaining the commercial rationale behind contractual consequences during negotiation. Clear drafting and demonstrable commercial justification enhance enforceability. In practice, parties should record contemporaneous evidence of their intentions so that, if challenged, the clause can be defended as proportionate and commercially necessary.

Conclusion

Rock Advertising, RTI v MUR Shipping and Cavendish v Makdessi collectively reinforce the primacy of freedom of contract and contractual certainty. They demonstrate a consistent judicial philosophy: parties are free to determine how obligations arise, how they may be amended, and what consequences follow from breach. Courts will not rescue parties from a bad bargain nor reshape obligations simply to soften economic hardship.

For Cyprus-based commercial actors, the implications are practical and immediate.

Careful drafting, adherence to agreed procedures and clear allocation of risk are essential. Well-structured contracts remain the most powerful tool available to safeguard commercial interests.

Ultimately, contractual certainty is more than a legal doctrine—it is the foundation upon which modern commerce depends.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified lawyer.