Construction

Chartbrook Ltd v Persimmon Homes Ltd and others [2009] UKHL 38 HL; SJ 7 July p27

In an application for the rectification of a contract there is no limit to the amount of ‘red-ink’ or verbal rearrangement or correction which the court was allowed when determining whether there was a clear mistake. All that is required is that it should be clear that something had gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant. Both those requirements were satisfied in the present case. Although it will not be inconsistent with the English objective theory of contractual interpretation to admit evidence of previous communications between the parties as part of the background which might cast light on what they meant by the language they used, there was no clearly established case for re-visiting the rule in Prenn v Simmonds [1971] 1 WLR 1381 that pre-contractual negotiations are inadmissible in construing a contract. Although evidence could be adduced that the parties to a contract regularly used words in an unconventional sense in order to support an argument that words in the contract should bear a similar unconventional meaning (‘the private dictionary’ principle) the decision in Partenreederei MS Karen Oltmann v Scarsdale Shipping Co (The Karen Oltmann) [1976] 2 Lloyd’s Rep 708 QBD (Comm) was an illegitimate extension of the ‘private dictionary’ principle which, taken to its logical conclusion, would destroy the exclusionary rule and any advantages which it might have.