The Blog

Clause and effect: what to do when contracts go wrong

Aug 4, 2023 | Uncategorised

Can a contract be changed after it’s written?

There are some occasions when the answer is a resounding “yes” – but the change needs to be agreed by both parties.

But what if a contract doesn’t reflect the intentions of the two parties in the first place?

Let’s say you provide training courses for hospitals. You and the hospital management agree that you’ll deliver two days of training. This is your “common intention” – you both intend for these two days of training to be delivered.

But when the contract is drawn up, there’s a mistake. You’re now down for three days.

By definition, a contract is legally binding – so does that mean you have to deliver more than you thought you were agreeing to?

In such cases, a legal mechanism called “rectification” can be used. It’s not often successful for the simple reason that it can be difficult to demonstrate what the original intention was.

But in limited cases, it can lead to the contract being rectified after the fact. In our hypothetical training scenario, “three” would be replaced by “two”.

Rectification can only be made by court order – and to get that far, you need to go through a lot of legal wrangling.

Your best bet is to ensure that your contracts are error-free from the get-go. When words are legally binding, they need to be accurate. A mistake can cost you business.

That’s why it can be advisable to get a contract lawyer on hand when drafting and signing contracts.

A good contract lawyer can spot a loophole from the next postal district. With their help, you’ll know you’re in safe hands and that the contract will reflect the common intention of the two parties.

Legal action is our bread and butter – but we know it’s something that you want to avoid at all costs. That’s why it’s best to ensure that your contracts are works of art, not Sloppy Joes.

What is rectification?

Rectification is when you correct a mistake to bring it in line with the parties’ original intentions.

A simple example might be that “employer” and “employee” are mixed up, leading to ambiguity. Or perhaps a word is missing so a sentence doesn’t make sense.

However, it gets more complicated when the contract doesn’t align with the original intentions of the two parties.

Courts can grant rectification in two scenarios.

  1. There’s a “common mistake” – in other words, one shared by both parties. You both thought that the contract reflected your interests, but it doesn’t.
  2. There’s a “unilateral mistake”. One party thinks the contract reflects a common intention. The other party knows it doesn’t – and is attempting to profit from this ambiguity.

To get rectification, the claimant has to demonstrate four things.

  1. The two parties had a common and continuing intention. In our hospital training scenario, both parties intended for two days to be delivered, but a mistake was made.
  2. The two parties outwardly agreed to this intention.
  3. The intention was shared throughout the drafting and signing of the contract.
  4. The contract as it is doesn’t reflect this common intention.

It usually applies to contracts but can also apply to supporting documentation – for instance, a disclosure or confirmation letter.

What’s a real-life example of rectification?

In 2019, the Court of Appeal considered the case of a share purchase agreement (SPA) and the disclosure letter that went with it.

It’s a clear example of how one party can lose out when a contract contains a mistake. In this case, the party sought damages because of it – and, unusually, won.

The claimant was a house-building company called Persimmon Homes Ltd. The defendants were Anthony Hillier and Colin Creed. They owned land for development.

The claimant entered into two SPAs. Their intention was to buy six plots of land owned by the defendants.

Once the contract was signed, it turned out that the claimant only got four of the six plots of land.

The claimant had lost out – and it appeared to be legally binding. But they sought to have it changed in the contract and accompanying disclosure letter. The contract, they argued, contained a mistake – not a true reflection of the intention they shared with the defendants.

What happened?

The High Court ordered both the SPA and the disclosure letter to be rectified.

They judged that the two parties had demonstrably shared a common intention when entering into the contract. They both believed that six plots of land were in question, not four – and there was correspondence to back this up.

As a result, the claimant was entitled to damages – compensation for those two missing plots of land.

This is a rare case of a successful rectification claim. It was successful because it was clear to the judge that the contract and disclosure letter didn’t reflect the common intention of the two parties.

What does a contract lawyer do?

In business, the devil is in the details. Those relationships that help a business thrive – whether between the business and its partners or between employer and employee – are legally bound by contracts.

That’s why there’s no room for error when it comes to drawing up contracts.

At best, mistakes in contracts can lead to time-consuming disputes. At worst, they can lead to court action, with one party pursuing rectification.

Getting a contract lawyer to help with your contracts can be invaluable. An experienced lawyer will be able to negotiate, draft, review and manage your contracts – and in the event of a dispute, can help to mediate.

Writing contracts is difficult. It’s not a skill you can pick up in an afternoon. It takes skill, expertise and experience.

A good contract lawyer will help you navigate the thickets of legalese. They’ll close any loopholes that could leave you vulnerable down the line. And they’ll negotiate a contract to make it as favourable to you as possible.

So before you draw up your next contract, you might want to consider instructing a solicitor.

Are you looking for a commercial law firm in Leeds, Harrogate or Pontefract? Contact Milners today for a free, no-obligation quote.

READ MORE

Latest From The Blog

5 Star Rated

Client testimonials

Get your FREE no-obligation consultation

We'll discuss your problem in detail and lay out expected costs so you'll know where you stand from day one. Your first consultation is completely free and comes with no strings attached.

Completely FREE
No Obligation
Friendly & Welcoming