Rectification is an order for the correction of a document. Courts cannot alter the terms of the agreement. However, where an agreement has not been correctly incorporated in a document the document may be corrected.
There is a heavy burden on a person who seeks to prove rectification of a written document. There is a strong presumption that the document is final and correct. Rectification may be raised as a defence where it is sought to enforce a document.
The essence of rectification is that the parties agree on terms and mistakenly omit or they are mistakenly recorded in the agreement then rectification will be available.
If there was a common intention to include or exclude a particular term until the moment the contract was finalised a document may be rectified even if there was no prior verbal contract including the point. If there was a prior common intention that a particular term be included a document may be rectified to provide for its inclusion.
The claim for rectification must be made by a party to the contract. Each must be party to the same mistake, such that it would be unconscionable for one to rely on the erroneous instrument/document to the detriment of the other.
Rectification generally applies to deeds and formal instruments. This includes conveyances, leases and share transfers. Rectification may apply to multiparty deeds and agreements such as a pension scheme or trust.
A voluntary deed including a trust or settlement may be rectified if there is sufficient evidence of the donor’s intentions. A claim may be made by the beneficiary. If the settlor does not consent and the application is made during his lifetime, rectification may be refused.
If the person creating the voluntary settlement or trust is no longer alive, rectification might be more readily granted. Exceptionally rectification may be allowed even though the trustee and settlor do not consent.
One Party’s Misunderstanding / Mistake
Where one person only makes a mistake rectification will not generally be allowed. There must be a common intention which was not ultimately expressed in the agreement.Rectification will not normally be granted where parties have in fact agreed resultant consequences which they did not intend.
The objective principles of contract law apply. The private intentions of the parties are not determinative. If the one party caused the other to believe reasonably that he intended to offer particular term or position, then he is bound, notwithstanding that his private intention might be otherwise.
The equitable remedy of rectification does not allow for correction of the substantive content of the underlying contract or bargain. The fact that parties or that one party has made a “mistake” in the contract does not entitle them to have it corrected. Rectification rectifies the manner in which the contract is implemented or reflected in writing.
Formerly, it was necessary to show that there was a valid and enforceable contract in place, before the instrument was made, which is incorrectly reflected in the instrument. However, within the last fifty years, the law has evolved so that it is no longer necessary to find a concluded and binding contract, prior to the making of the instrument.
There must be a concluded “agreement” (which may fall short of being a contract), prior to the instrument which is sought to be rectified. The prior agreement need not necessarily be binding in law. It need not be evidenced in writing. However, this would be of assistance in discharging the high onus of proof that applies.
A prior agreement is not required if there is a prior record of a proposed agreement, which has been outwardly expressed and communicated between the parties.
Under the modern test, which has been accepted in Ireland and England, rectification may be ordered provided there was a common continuing intention in relation to the agreement. The parties must have been of one mind, up to the point in time when they executed the instrument. Rectification will be available if the instrument does not correspond with their common agreement.
Continuing Common Intention
The common intention of the parties must be sufficiently ascertainable. Claims for rectification will fail where the common intention of the parties cannot be established with sufficient certainty. Where one party did not know of the other’s intentions, then there is likely to be no common intention and the claim for rectification is likely to fail.
The English courts have required that there should be some outward expression of the agreement between the parties in all cases. This requirement has caused some degree of confusion and has been criticised.
Rectification applies where there is a lack of conformity between the instrument and the prior common agreement or intention. If there is no lack of conformity, it is not available. If the order reflects the true contract, as found by the court, no rectification is allowed even though one party might have been mistaken about what he had agreed.
Unilateral Mistake Principle I
Generally, a mistake on the part of both parties is required before the agreement will be rectified. A so-called unilateral mistake is made by one party. It will generally be inconsistent with the existence of any agreement or common intention at all.
However, a unilateral mistake in the sense used in contract law may be present where one party believes a particular term to be in the contract and the other person knows that the other party so believed. This may happen where a person makes a very obvious mistake and the other party stands by silently. In this situation, rectification may be ordered..
It is required that one party believed in error that the document to be rectified contained a particular provision or mistakenly believed that it did not contain that provision. The other party must have been aware of the mistake and did not draw the first person’s attention to the mistake. The mistaken addition or omission must have been for the benefit of the first person.
It may be enough if the party’s solicitor is aware of the mistake. If however, the party is not aware of the mistake, rectification is not available.
Unilateral Mistake Principle II
Rectification may be granted where one party’s conduct is fraudulent. If one party is aware a person signing a document under a mistake and says nothing there may be rectification where this amounts to sharp practice. Generally, the cases involve very obvious mistakes which are seen and deliberately ignored.
The mistake must be such that it is inequitable not to rectify the instrument. One party must know or ought to have known of the other’s mistake. The reliance on the erroneous document must amount to equitable fraud so that it would be inequitable to retain a benefit derived from mistake, sharp practice or fraud.
If one party wrongly thought the document included a particular term or excluded it the other party was aware of the mistaken and didn’t draw attention to it, the conclusion would have been to the mistaken party’s benefit.
Where a person is in a fiduciary relationship, the mistake may comprise the failure to disclose material matters. The person for whose benefit a fiduciary relationship exists may be entitled to rectify an instrument, where there has been non-disclosure in relation to a material matter.
Rectification runs against the parol evidence rule and is an established exception to it. The parol evidence rule is that t verbal evidence is not admissible or allowed, to add, vary, or contradict a written instrument. However, rectification is an exception to the rule.
The onus of proof in rectification is very high. Proof must be convincing of the prior intention intended to be incorporated. In some cases, rectification is not necessary. In many cases, Courts read documents as if errors on their face are read as if corrected. This may be done to make sense of a document without the need for rectification.
The courts require a high degree of proof of the error. Some courts have indicated that it must be proved beyond reasonable doubt or must be convincing or “irrefragable”.
Denial of Remedy / Equitable Principles
As with other equitable remedies, rectification is discretionary. However, some different considerations apply to those that apply to other remedies. There is a greater degree of entitlement to rectification, once the grounds are established. Otherwise,if rectification was refused, the instrument would remain effective in a form which is not the agreed form.
A deed will not be rectified if the property which is its subject matter, has been purchased by a bona fide purchaser in reliance on it. The order may not be made to prejudice the bona fide purchaser.
An unreasonable delay may make it inequitable and unjust to seek the relief. Equally, in some cases, undue prejudice or hardship may be a ground of refusal of rectification.
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