Check Your Contracts

Yet another case has proved the point that when contracts are being negotiated it is essential to check the entire contract carefully before signature.

The case involved building firm George Wimpey, which agreed to buy a piece of land, the purchase price of which was based on a formula. The contract went back and forth during the negotiations and at one point the vendor changed the formula, with the result that the purchase price payable by Wimpey was increased by £800,000.

Wimpey went to court to ‘rectify’ the contract on the basis that it had mistakenly signed the contract, which was therefore not representative of the intentions of the parties to it. Wimpey claimed that the vendor’s failure to draw the change in the formula to its attention was not the action of an honest and reasonable person.

The High Court ordered the contract to be rectified in Wimpey’s favour. The vendor then appealed to the Court of Appeal.

To obtain an order for rectification, a number of criteria must be satisfied. These are:

• that the person claiming rectification must show that they honestly believed the contract contained (or did not contain) the contractual term;
• that the other party must be aware of the term and of their mistake;
• that it must benefit the other party; and
• that they must not have drawn the attention of the other side to the contract term.

The Court of Appeal ruled that Wimpey had failed to provide sufficient evidence that it had made a mistake and also that there was insufficient evidence to show that the contract as signed did not represent the intentions of the parties to it. Furthermore, Wimpey had not shown that the vendor was aware of the mistake or had failed to make the enquiries that an honest person would make.


 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.