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Contract Law - Terms 4 (3/4) Rectification - Coggle Diagram
Contract Law - Terms 4 (3/4)
Rectification
I. Introduction
= equitable remedy. Court corrects text of a written contract by inserting/changing words that have been omitted or included by mistake
II. Rectification for Common Mistake
1. Mistake in recording the terms in the document
/#from making
Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] -> # erroneous assumption :warning:
2. The law before Chartbrook
(a) Test
Swainland Builders Ltd v Freehold Properties Ltd [2002]
common continuing intention of the parties
outward expressionof accord
intention contued at the time of exe
by mistake, instrument did not reflect that common intention
(b) Analysis of test
(i) Common continuing intention is enough
Joscelyne v Nissen [1970] :warning:
(ii) How to establish common continuing intention
Britoil plc v Hunt Overseas Oil Inc [1994] heads of agreement :red_cross:
Objective approach but subjective states of mind not irrelevant
3. The law following Chartbrook
(a) The position in Chartbrook
(i) Lord Hoffmann’s obiter comments in Chartbrook
:question: what would an objective observer have understood the intention of the parties to be
(ii) Application to the facts of Chartbrook ...
(iii) Criticism of Chartbrook
Daventry District Council v Daventry & District Housing Ltd [2011] :red_flag:
Objectively construed, the non¬binding agreement meant x (A position) but the written contract means y (B). = A is right.
(b) The position in Daventry
Rectification ordered
No shared mistaken belief as to the legal effect of the written contract, there was a shared mistaken belief (albeit for opposite reasons) that the written contract gave effect to the prior agreement
Based on correct approach of Hoffmann in Chartbrook (# views as to the desirability of that approach)
4. Assessment of Lord Hoffmann’s approach
(a) Advantages
T Etherton (2015) :closed_book:
(1) Avoids problems of proof
(2) Court has more power to rectify contracts so as to avoid injustice
(3) Consistent with the approach to interpretation of contract
(b) Disadvantages
(1) Artificial results, e.g., in Chartbrook
(2) More intrusive
(3) Blurs line between common and unilateral mistakes
(4) Undermines the role of equity
P Davies (2016) :closed_book: -> what if common subjective intention not in the doc? equitable rectif as a safety valve?
5. Current position: FSHC Group Holdings
FSHC Group Holdings Ltd v GLAS Trust Corp [2019] :red_flag:
(a) Is the approach in Chartbrook correct?
Principle
Leggatt LJ = 2 formes of rectification (2 principles)
(1) Rectification of a document because it does not reflect the terms of a prior concluded agreement (agreements must be kept, contractually agreed to record -> terms of prior contract objectively determined)
(2) Rectification where no prior doc to rectify, but had a common continuing intention in respect of a particular matter which was not reflected in the document
an equitable principle of good faith -> parties’ subjective states of mind
Precedent
The Chartbrook approach was inconsistent with precedent
Hoffmann in it = obiter. Daventry based on Chartbrook correct but Daventry no binding on CA
Policy considerations
Certainty = primacy to the final written terms
Objective approach can lead to unfairness
(b) What is the current approach?
(1) A prior concluded contract, in which case the terms of the prior contract must be objectively determined; or
(2) A common continuing intention shared by the parties, in which case the existence of the intention must be established as a subjective state of mind, and it must also be shown that, as a result of communication between them, the parties understood each other to share that intention.
III. Rectification for Unilateral Mistake
2. Basis of intervention
D’s unconscionable acquiescence in C’s mistake.
FSHC Group Holdings Ltd v GLAS Trust Corp [2019] -> extension of the equitable principle of common mistake rectif (no prior ct) (// contrary to GF)
1. Test
Rectification may be ordered if one party:
(i) is aware that the other party is mistaken about the content or meaning of the written terms in the contract, and
(ii) unconscionably fails to point this out.
Awarness covers:
(1) D has actual knowledge; or
(2) D is wilfully blind to an obvious fact; or
(3) D wilfully or recklessly fails, contrary to the notion of reasonableness and honesty, to inquire whether there has in fact been a mistake.
Commission for New Towns v Cooper (1995) :warning:
George Wimpey UK Ltd v VI Components Ltd [2005] :red_flag:
IV. Relationship between Interpretation and Rectification
1. Effect of changes within rectification
See above for the argument that the objective approach in Chartbrook undermined the role of the equitable doctrine of rectification.
2. Effect of changes within interpretation
Argued that by recognising ‘corrective interpretation’, ICS has blurred the distinction between interpretation and rectification.
(a) Why does it matter?
Date of meaning. Rectif = date of court's order, new. Interpretation = always had the meaning
Third parties. Rectif may be refused to protect 3rd parties in GF, interpretation does not care
(b) Current scope of rectification
Rectification is particularly significant where pre-contractual negotiations play a role. Such negotiations can be taken into account when rectifying a contract, but not when interpreting it.
(c) Future scope
Case for extension
R Buxton (2010) :closed_book:
Lord Sumption vs Lord Hoffmann again
Sumption (2017) -> no need for rectif if you can find an intention
Hoffman (2018) -> construction is anterior to rectif. Sometimes, cannot amount to interpretation, rectif only remedy