Rectification

A document (such as a contract) can be rectified where there was a common continuing consensus as to what has been agreed and by mistake this is not reflected in the document. The consensus must have been outwardly expressed.

In Chartbrook Ltd v Persimmon Homes Ltd ([2009] 1 AC 1101, HL) Chartbrook had entered into a development agreement with Persimmon. The parties had radically different understandings as to the correct construction of the clauses in the contract dealing with the money to be paid to Chartbrook. Persimmon succeeded in persuading the House of Lords that their proposed construction of the agreement accorded with what a reasonable person would have taken the parties to have agreed.

Nevertheless, Persimmon having succeeded purely as a matter of interpretation of the contract, the House of Lords went on to consider whether they might also have succeeded in an action for rectification of the contract if need be. The House of Lords concluded that this claim was entitled to succeed.

The elements of rectification are:

1. the parties must have had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter to be rectified;

2. there must have been an outward expression of accord;

3. that intention must have continued at the time of execution of the instrument sought to be rectified; and

4. by mistake, that instrument failed to reflect the common intention.

You look at what the parties said and did and compare that with the contract.

In Chartbrook, the essence of the payment arrangements had been agreed in correspondence at the outset and no relevant change to the basis of this calculation appeared in subsequent negotiations. The parties each mistakenly believed that the contract reflected this agreement.  The claim for rectification would also have succeeded.

Michael Lower

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