Mistake and Rectification of Contracts

For a binding agreement to be formed, there must be a meeting of the minds of all parties regarding the essentials of the contract.

Where however only one party is under a mistaken belief this is called a unilateral mistake which if material and reasonable may render the contract void. Mistakes induced by misrepresentation or fraud will not be enforced by our courts.

If parties enter into a written contract that does not record their true intention then either party may apply to court to have the written agreement rectified.

The parol evidence rule however provides that a written agreement is regarded as the only memorial of the agreement and that no other evidence may be introduced to prove other terms of the agreement. Generally no evidence may be given to alter a clear and unambiguous written agreement.

Where the written contract as it stands cannot be used to prove the true version or content of the agreement it may be necessary to institute proceedings for the rectification of the contract to reflect the true intention of the parties.

The onus rests on the party seeking rectification to prove that the existing written contract does not reflect the party's intention and this is not an easy onus to discharge. The difficulty in discharging the onus  arises mainly because it is usually very difficult to prove what somebody else was thinking at the time the contract was entered into. The plaintiff will have to prove that there was a clear and unmistakable intention that was not recorded in the contract.

Written contracts frequently provide that no representations, warranties or variations will binding unless reduced to writing and are signed by the parties. Such a provision will increase the difficulty of discharging the onus of proof where rectification is sought.

Members are therefore strongly advised to carefully examine the contents of any agreement prior to signing it. They should not allow themselves to be “sweet talked” with promises into signing agreements that do not contain the exact terms they intend to be bound by.

Bruce Lyle | Membership Services Manager