INTERPRETATION, PRE-CONTRACTUAL NEGOTIATIONS AND RECTIFICATION

Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 3 WLR 267

In Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 3 WLR 267 the House of Lords declined the invitation to depart from the general rule that evidence of pre-contractual negotiations is inadmissible when seeking to interpret a contract. It also identified the limits of this exclusionary rule. In particular, the rule does not exclude reliance upon pre-contractual negotiations to establish that a fact which may be relevant as background was known to the parties, or to support a claim for rectification or estoppel by convention. The House of Lords also affirmed that, while the courts require a strong case to persuade them that something must have gone wrong with the language used by the parties, they can, in an appropriate case, decline to interpret the contract in accordance with the ordinary rules of syntax. The present case is an example of this. The ordinary meaning made no commercial sense and, this being the case, their Lordships adopted a meaning of the clause which gave effect to the commercial purpose which the parties were seeking to advance when inserting the disputed provision into the contract.