If the terms of a contract fail to reflect what the parties have agreed, the court may, subject to a number of conditions, make an order for rectification on the ground that the parties were mutually mistaken. Ahmad v Secret Garden (Cheshire) Ltd [2013] EWCA Civ 1005 concerned an agreement for lease and subsequent lease, which did not contain all the terms set out in the previous agreement. Unfortunately, the agreement for lease was not legally enforceable because the parties had not reached an agreement on all its terms and had created the document as a precursor to a formal lease.
The lease required registration at the Land Registry and, although it referred to unspecified additional terms, the missing terms could not be identified from the lease itself. Consequently, the missing terms were not enforceable without an order for rectification. Where did this leave the tenant?
One of the conditions to be satisfied before the court will agree to rectify a document exists to prevent parties to contracts from disavowing their agreements simply because they have become commercially undesirable. Consequently, anyone applying for rectification must be able to point to clear evidence of a consensus on some issue, which the executed and unrectified agreement does not reflect. Their agreement must, in cases of mutual mistake, be objectively ascertained by reference to what both parties did and said, and not to what each of them may privately have thought.
The landlord argued that the fact that the tenant had executed the lease without amending it to incorporate the amendments set out in the earlier agreement was, on the face of it, evidence that any agreement between the parties that the provisions of the earlier document should also apply was at an end. The trial judge disagreed. She accepted evidence that the landlord had assured the tenant that the earlier amendments would stand and decided that the landlord had then changed his mind, after the lease was executed.
The Court of Appeal upheld the decision. It agreed that several factors made it easier for the tenant to show an outward expression of accord in this case. The negotiations had been relatively short. The parties had used the standard form of business lease produced by the Law Society (as opposed to using custom-made documents), and had conducted the negotiations themselves, without legal representation.
The parties had agreed that the documents should operate in conjunction with each other. This was not a case where they had made a deliberate decision to leave some of the terms of their contract in a separate document because they desired to achieve the effect of its being a separate instrument. Therefore, it was possible to distinguish Oun v Ahmad [2008] EWHC 545 Ch; [2008] PLSCS 71, where the court had refused to rectify an agreement that did not comply with section 2 of the Law of Property (Miscellaneous Provisions) 1989 Act because the parties had deliberately chosen to put some terms into a separate agreement. In the circumstances of this case, the court was rectifying the registered lease – and not the parties’ bargain – by making an order amending or deleting the offending clauses to reflect the parties’ agreement.
Allyson Colby is a property law consultant
