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COMMON MISTAKE RECTIFICATION: SUBJECTIVE INTENTIONS V OBJECTIVE MEANING

Lloyd's Maritime and Commercial Law Quarterly

COMMON MISTAKE RECTIFICATION: SUBJECTIVE INTENTIONS V OBJECTIVE MEANING

Hugh Beale* and Ned Beale

FSHC v GLAS

Introduction

A contractual document has been executed by the parties, but party A claims that the document does not represent what it had agreed with party B. In what circumstances can A obtain rectification of the document? The question arises in two broad situations:
  • (1) The parties had agreed on X, or that a provision of the contract should mean X, but the document instead states or means Y, when rectification may be granted on the basis of a common mistake; or
  • (2) Party A intended X but, whether or not the parties had agreed beforehand, party B encouraged or allowed A to sign the document stating or meaning Y, although party B knew that party A intended X, when rectification may be granted on the basis of a unilateral mistake.
The judgment of the Court of Appeal in FSHC Group Holdings Ltd v GLAS Trust Corp Ltd 1 concerns common mistake rectification.
The essential elements of common mistake rectification are settled, having been summarised by Peter Gibson LJ in Swainland Builders Ltd v Freehold Properties Ltd 2 as: (i) a pre-contractual common continuing intention, whether or not amounting to an agreement; (ii) an outward expression of accord; (iii) the common intention continuing at the time the document sought to be rectified was executed; and (iv) by mistake, the document did not reflect that common intention.3 However, the test to be applied when determining whether there was a common continuing intention (and, to a lesser extent, what is meant by an outward expression of accord) has been controversial.
In Chartbrook Ltd v Persimmon Homes Ltd,4 Lord Hoffmann, with whom the other members of the appellate committee agreed, expressed the view (obiter, as the House

2

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