A land purchase contract had been rectified by the judge for unilateral mistake. A factor had been dropped from a formula for calculating the price.
Held: The judge’s conclusion that the circumstances existed to allow a rectification was incorrect. The appeal was allowed: ‘There is, as it seems to me, a paradox in the notion of what an honourable and reasonable person would do in the context of an arm’s-length commercial negotiation. This is a context in which honour (or honesty) and rationality (or reasonableness) are frequently not on speaking terms.’
The court continued to consider the place of mistake: ‘The phrase ‘honest and reasonable’ is not a term of art. It is a judicial attempt to sketch a line beyond which conduct may be regarded as unconscionable or inequitable. Its duality, however, is a recognition that honesty alone is too pure a standard for business dealings because it omits legitimate self-interest; while reasonableness alone is capable of legitimising Machiavellian tactics.
Mistake is a concept which sits awkwardly in this space. Absent a prior accord which has simply not been carried into effect, absent also a dishonest inducement to contract, one is looking for a mistake on the claimant’s own part which the defendant was honour-bound, despite his own legitimate business interests, to point out to him. I am unable to accept that this was such a case on any tenable view of the evidence.
There are at least two kinds of mistake. One is a literal misunderstanding of some fact material to the proposed contract. The other is an error of judgment in entering into the contract. I find it difficult to think that the second kind has any relevance to the law of unilateral mistake. Nobody is bound, even in honour, to help his opposite number to negotiate to the best advantage.’
The defendant was entitled to assume that the claimant knew what it was agreeing to. Dishonesty had not been pleaded, and the judge was not entitled to find it.
Sedley LJ discussed the situation as to representations made during a negotiation: ‘There is, as it seems to me, a paradox in the notion of what an honourable and reasonable person would do in the context of an arm’s length commercial negotiation. This is a context in which honour (or honesty) and rationality (or reasonableness) are frequently not on speaking terms. I doubt that [counsel’s] submission that the two epithets qualify each other does more than compound the paradox.
Take the present case. An honourable person negotiating for [the Defendant] would probably have asked [the Claimant] if they realised that E had been left out, but I very much doubt whether a reasonable negotiator would have done so. His first duty would have been to his own principal, whose interests undoubtedly lay in leaving E out and not alerting [the Claimant] to the omission.,br />The phrase ‘honest and reasonable’ is not a term of art. It is a judicial attempt to sketch a line beyond which conduct may be regarded as unconscionable or inequitable. Its duality, however, is a recognition that honesty alone is too pure a standard for business dealings because it omits legitimate self-interest; while reasonableness is capable of legitimising Machiavellian tactics.’
Lord Justice Peter Gibson Mr Justice Blackburne Lord Justice Sedlay
[2005] EWCA Civ 77, Times 16-Feb-2005, [2005] BLR 135
Bailii
England and Wales
Citing:
Cited – Commission for the New Towns v Cooper (Great Britain) Ltd, (Formerly Coopind UK Ltd) CA 4-Mar-1995
The trial judge had dismissed a claim for rectification on the basis that the defendant hoped and suspected, but did not know, of the relevant mistake by the plaintiff.
Held: Rectification was ordered because the defendant had sought to . .
Cited – Britoil plc v Hunt Overseas Oil Inc CA 1994
After the failure of the attempt by the Texan oil tycoon, Nelson Bunker Hunt, in the 1970s to corner the world silver market, his fortune collapsed and his companies were forced to sell off assets. In 1979 two of those companies (the defendants in . .
Approved – Thomas Bates and Sons Ltd v Wyndham’s Lingerie Ltd CA 21-Nov-1980
An application was made for rectification of a rent review clause in a lease. When executing the lease, the tenants’ officer, Mr Avon, noticed that the rent review clause in the lease drafted by the landlords was defective in not including a . .
Cited – Three Rivers District Council and Others v Governor and Company of The Bank of England (No 3) HL 22-Mar-2001
Misfeasance in Public Office – Recklessness
The bank sought to strike out the claim alleging misfeasance in public office in having failed to regulate the failed bank, BCCI.
Held: Misfeasance in public office might occur not only when a company officer acted to injure a party, but also . .
Cited – A Roberts and Co Ltd v Leicestershire County Council ChD 1961
The court considered the circumstances required for rectification of a contract after a unilateral mistake. Pennycuick J said: ‘a party is entitled to rectification of a contract upon proof that he believed a particular term to be included in the . .
Cited – Riverlate Properties Ltd v Paul CA 1974
A lessor sought to have the lease rectified against the tenant, saying the tenant had sufficient knowledge of the error in the lease to permit that remedy.
Held: The tenant had no such knowledge as would have brought the doctrine into play. In . .
Cited – London Borough of Barnet v Barnet Football Club Holdings Ltd CA 30-Jul-2004
An application was made for the rectification of a transfer.
Held: The fact that the contract has been negotiated by a person who is not the decision-taker and has made an error is irrelevant unless it can be shown that the decision-taker . .
Cited – Baden v Societe Generale pour Favoriser le Developpement du Commerce et de l’Industrie en France SA (Note) 1993
The court looked to various forms of knowledge which could be attributed to a party when considering a rectification. Knowledge may be proved affirmatively or inferred from circumstances. The various mental states which may be involved are (i) . .
Cited – Lee Ting Sang v Chung Chi-Keung PC 8-Mar-1990
Deciding Whether person was an employee
(Hong Kong) The Board considered the conclusion that the applicant stone mason was not an employee of the defendant: ‘even if I leaned towards the opposite conclusion, it would nevertheless be quite impossible for me to say that no tribunal . .
Cited by:
Cited – Littman and Another v Aspen Oil (Broking) Ltd CA 19-Dec-2005
A lease had been granted with a break clause, which the tenant exercised. The Landlord said it had not complied with its obligations and was not free to exercise that clause. The clause had included the word ‘landlord’ where it should have read . .
Cited – Connolly Ltd v Bellway Homes Ltd ChD 23-Apr-2007
connolly_bellwayChD2007
The claimant sought rectification of a contract for the sale of land, or damages in deceit. They said that it had been agreed that the price would be adjusted to reflect any change in values. The formula inserted made no great sense mathematically, . .
Cited – Daventry District Council v Daventry and District Housing Ltd CA 13-Oct-2011
The appellant challenged refusal of rectification of its agreement with the defendant. They asserted either mutual or unilateral mistake. The parties had agreed for the transfer of housing stock and management staff to the respondents. The claimant . .
Cited – Daventry District Council v Daventry and District Housing Ltd CA 13-Oct-2011
The appellant challenged refusal of rectification of its agreement with the defendant. They asserted either mutual or unilateral mistake. The parties had agreed for the transfer of housing stock and management staff to the respondents. The claimant . .
Lists of cited by and citing cases may be incomplete.
Contract, Land
Updated: 11 November 2021; Ref: scu.222174
