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A lease contained a break clause, but the wording was rather odd: it said that if the break was exercised by L, then that would be conditional upon T paying the rent and having observed all its covenants in the lease. On the other hand, T’s right to break was unconditional.
This is, of course, the complete reverse of what one would expect (ie L would normally have the unconditional right to break, with T’s right being conditional). Not surprisingly, the court eventually accepted that the clause was an absurdity and served no commercial purpose. Importantly, the court could not find any condition that could possibly have been intended to attach to an L’s notice to break; there had clearly been a mistake and it was also clear what the correction should be (ie substituting L for T and T for L). Thus, it was possible to correct the lease as a matter of ‘construction’.
In summary, a court will correct a mistake ‘by construction’ if (i) there is a clear mistake on the face of the document, and (ii) it is clear what correction needs to be made to correct the mistake.
But, most disputes involve mistakes that are less clear cut. In that situation, it is then a case of applying to the court for rectification. That will only be ordered if there has been (i) a mutual or common mistake or (ii) a unilateral mistake. Different principles apply:
1
Mutual or common mistake: this is where both sides mistakenly believe
that the lease gives effect to their intentions. The burden of proof is on
the party claiming rectification to show that:
- the parties had a common continuing intention in respect of the matter to be rectified;
- there was an outward expression of accord;
- the intention existed at the time of the execution of the document; and
- it was a mistake that the document did not reflect that common intention.
2
Unilateral mistake: to rectify a unilateral mistake, the party claiming rectification must show that:
- A mistakenly believed that the document contained (or did not contain) a particular term;
- B was aware that the document did (or did not) contain the particular term and that this was a mistake made by A;
- B failed to draw the mistake to A’s attention;
- the mistake benefits B.
Needles to say, rectification claims based on mistake (whether mutual or unilateral) often depend on their own complex facts, and have to be treated differently from mistakes ‘by construction’. For authorities and examples see article in [2006] 168 Property Law Journal 6.
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May 2006 |
