Contract: correction of mistakes

In KPMG LLP v Network Rail Infrastructure Ltd, part of a break clause in a lease executed in 1985 had no obvious meaning and was difficult to construe; comparison with an earlier draft of the lease appended to an agreement for a lease signed in 1974, appeared to show that words had been omitted erroneously from the 1985 version (Source-Practical Law).

The Court of Appeal decided that it was permissible for the court to refer to the draft version as an aid to the construction of the lease, even though the parties had intended the 1985 version to supersede the 1974 agreement.

The court then held that, once it had identified that the most plausible construction of the break clause was that words had been omitted in error, it was able, as part of the process of construction, to amend the lease by supplying the missing words from the earlier draft, even though there might be more than one possible version of the replacement and more than one possible explanation for the omission of the words.

The court also held that the break clause could not be amended by a claim for rectification, because the evidence showed that the intentions of the parties in relation to the effect of the break clause had not remained unchanged up to the execution of the lease in 1985.

What this shows is that courts can be practical-looking at an earlier draft and deciding an erroneous omission had occurred though this approach should not be expected in each and every case.

The best apporach is to ensure thorough drafting or your agreement occcurs and then checking and rechecking to ensure all points have been covered.