Workshop: Property: claims of rectification

Sometimes, there may be a situation whereby an agreement has been reached by the parties but there is an error in the document. Either a term is omitted from the contract altogether, or it is recorded incorrectly. I could go into the possible negligence claims which may be made against conveyancers in such situations, but instead I will simply reiterate the need for conveyancers to cover their backs by confirming the client's instructions in writing.

If an agreement is reached between the buyer and seller directly and you are then instructed to include this in the contract, you should write back to your client to confirm the instructions given and advise on the amendments to the contract. In doing so, you will ensure that your interpretation of your client's instructions are the same as intended by the client and, also, prevent a claim being made against you should the instructions be misinterpreted.

However, let's say that an error has been made and there is no fault on the part of the conveyancer. For example, the seller agrees directly with the buyer, via email, that he will repair the roof to the property being purchased prior to completion. Each conveyancer is informed and a contractual term is agreed but, unfortunately not incorporated into the final agreement. What can be done?

By applying the 'reasonable person' test it can be established that the mistake was an obvious one and can be disregarded. In addition, a claim may be made for the equitable remedy of 'rectification'.

It can be difficult for a claim of rectification to succeed in court. Rectification cannot be used to change the substance or consequence of a transaction. Instead, mistakes such as misdescription, omission, wrong provision or wrong words are examples of matters that can ?be rectified.

Investec Bank (UK) Ltd v Zulman [2009] EWHC 1590 (Comm) summarised the governing principles of rectification:

1. It is a form of relief for the purpose of correcting a written agreement because it does not reflect the true agreement at the time it was made;

2. there must have been a continuing common intention regarding the provision; the failure must be as a consequence of a mistake, either common to both parties or a unilateral mistake where one party may be aware of the mistake but fails to draw attention to it;

3. the agreement, if corrected, must then represent the true agreement;

4. convincing proof is required to counteract the evidence of the parties' intention.

Where a common mistake has been made, evidence of a common intention as to the term(s) of the agreement should be produced. This evidence can be conversations or emails between the parties but, an intention which is held but not communicated will not be enough.

A unilateral mistake would require that one party thought the agreement contained a term or provision (or not) when, in fact, it did not. The other party must be aware of the omission or inclusion and that it was due to a mistake of the first party. The mistake must be one which is calculated to benefit the second party. It would be difficult to show if the second party intended not to bring the mistake to the attention of the first party in order to derive some benefit. In fact, the courts have established that actual knowledge of the mistake on the part of the second party ?will be sufficient.

I should also point out that an entire agreement clause does not preclude ?a court from rectifying a document.

In practice, you will probably find that where a mistake has been spotted, then the parties to the agreement are likely to agree to rectify the error by entering into a deed of rectification themselves. Court proceedings would only be necessary ?where one party refuses to agree to the rectification or if the parties want to make sure that the rectification has retrospective effect which can only be achieved by court order as the court has the discretion to determine from when the contract comes into operation.

So in the example given above, firstly the parties should try and agree to rectify the contract by way of a deed of rectification. However, if this is not possible (perhaps the seller has seen that he may be able to get out of the obligation to repair), then it could be argued that there has been a common mistake that can be rectified. The email correspondence and clause drafting negotiations would support the common intention that the contract should have included the obligation on the seller.