Rectification

What is Rectification?

Rectification is an equitable power to alter a transactional document to ensure that it conforms to the parties intentions. It is an application of the equitable maxim that ‘equity looks to substance, not form’.

Rectification is not available:

• To change the substance of the underlying transaction: Ashcroft v Barnsdale and others [2010] EWHC 1948.
• Where the defects in the document are too fundamental or widespread: Fairstate Ltd v General Enterprise & Management Ltd [2010] EWHC 3072.

Rectification of Contracts

A contract can be rectified if it is apparent that something has gone wrong when recording the language of the contract. It applies only if the parties reached a prior agreement, but due to an error the written document does not record both parties’ intentions: Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450.

The prior agreement must either be:

• A concluded contract; or
• A ‘continuing common intention’, usually evidenced by an ‘outward expression of accord’: Munt v Beasley [2006] EWCA Civ 370.

Unilateral mistake cannot be relied on for rectification (Riverlate Properties v Paul [1975] Ch 133) unless the other party is aware of that mistake (Roberts and Co Ltd v Leicestershire [1961] Ch 555) or unconscionably intends the other party to be mistaken: Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259. For example, it might be granted where one party suspects the other is mistaken, and takes action to prevent them discovering the mistake.

‘Convincing proof’ of these requirements is required: Joscelyne v Nissen [1970] 2 QB 86.

The justification for rectification is that the parties have essentially already entered into a contract (though this is strictly not required) before the written document is created. As part of this, the parties have a right that the written document will properly reflect this agreement. Equity will enforce this right.

While rectification of a contract is an exercise in giving effect to the parties’ intentions, it is distinct from contractual interpretation on two grounds: Tartsinis v Navona Management Co [2015] EWHC 57

1. Contractual interpretation is based on ascertaining the parties’ objective intentions. It is controversial whether rectification seeks to give effect to their subjective or objective intentions. Legatt J in Tartsinis favoured the subjective approach, while the court in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 held that the parties’ intentions must still be ascertained from the perspective of the reasonable observer.
2. Precontractual negotiations are not admissible evidence when interpreting a contract. They are admissible evidence of the parties’ intentions when seeking rectification, by contrast.

Rectification of Wills

If a will fails to carry out the testator’s intentions due to an error in recording or understanding their instructions, the court may rectify the will document: Administration of Justice Act 1982, s.20.

Rectification of Trusts

Rectification of a trust document is available if: Racal Group Serves Ltd v Ashmore [1995] SCT 1151

1. There is clear evidence that the settlor subjectively intended that the trust would achieve a particular effect.
2. Due to an error in the document, this intention was not recorded.
3. The issue is capable of being contested (whether or not the parties all agree that rectification should occur).