CAN YOU RECTIFY A CONTRACT IF YOU MAKE A MISTAKE ABOUT THE NATURE OR QUALITY OF A CONTRACTUAL TERM?
In Doo Wan Tsong Charles and others v Oxley Jasper Pte Ltd and another [2021] SGHC 249 (“DWT x Oxley”), the Singapore High Court held that a mistake by one party as to the nature or quality of a contractual term does not justify rectification of the contract.
Summary. In DWT x Oxley, the plaintiffs, who are five of the subsidiary proprietors of a property, sought rectification of a sale and purchase agreement. This was on the basis that the Collective Sale Committee (“CSC”) of the property had made a mistake when entering into the sale and purchase agreement, the mistake being that the CSC had thought that the maximum permissible number of dwelling units under the prevailing guidelines was 120 units, instead of 112 units ([2] – [6] DWT x Oxley).
While the plaintiff’s case in DWT x Oxley does not only rest on rectification alone ([7] DWT x Oxley), it is nonetheless relevant to note some of the observations made by the Singapore High Court in dealing with this aspect of the plaintiff’s case.
Unilateral mistake. To start, it is important to note that the plaintiffs’ case is based on unilateral mistake by the CSC, not common mistake (21) DWT x Oxley).
As such, the Singapore High Court held that as set out in Thomas Bates and Son Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 WLR 505 (“Thomas Bates”), the conditions are obtaining rectification are as follows ([24] DWT x Oxley):
“… it must be shown: first, that one party, A, erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term or provision which, mistakenly, it did contain; second, that the other party, B, was aware of the omission or the inclusion and that it was due to a mistake on the part of A; third, that B has omitted to draw the mistake to the notice of A. And I think there must be a fourth element involved, namely that the mistake must be one calculated to benefit B. If these requirements are satisfied, the court may regard it as inequitable to allow B to resist rectification to give effect to A’s intention on the ground that the mistake was not, at the time of execution of the document, a mutual mistake.”
Based on Thomas Bates, the first element is that there is a mistake as to a term: more accurately, that there was a term in the contract which was mistakenly included or the contract mistakenly omitted a term.
Unable to rely on Thomas Bates. Given that the plaintiffs’ case is that the CSC knew that the CSC agreed to 120 units, but made a mistake in thinking that the maximum number of units is 120 and not 112 (see [20] DWT x Oxley), the Singapore High Court held that based on Thomas Bates, the plaintiffs’ case would fail as the mistake was not a mistake as to what the terms were, but a mistake as to the nature or quality of the term ([25] – [30] DWT x Oxley).
The Singapore High Court further held that local authorities also do not assist the plaintiffs and stated that in the case of Yap Son On v Ding Pei Zhen [2017] 1 SLR 219, the “relevant mistake [was] one as to what the terms of the agreement were. The parties here agreed on 120 units and the document reflected that by way of the 120 units CP. There is therefore no mismatch between the parties’ agreement and the instrument which purports to record it.” ([32] – [33] DWT x Oxley).
Rectification to reflect what the mistaken party believed the contract to be. After reviewing the various authorities, the Singapore High Court then held that rectification is not only available to rectify a contract to reflect the “true agreement / intention” of the parties.
Rectification is also available to reflect what the mistaken party believes the contract to be. However, rectification is not available to rectify a contract to reflect what the mistaken party (on its part) would have liked to have agreed to. See [48] – [49] DWT x Oxley as set out below.
“48 The statement in [48] of Kok Lee Kuen (see [43] above) that rectification affirms “a contract which the parties made” was in the context of rectification for common mistake (the court’s primary finding); the court however also accepted that unilateral mistake would have been available, if only the purchaser were mistaken. Similarly, the reference at [65] of Yap Son On to rectifying a document to accord with “the parties’ true intention” was in the context of common mistake. Where rectification is granted for unilateral mistake, the touchstone is what the mistaken party believed “the parties’ true intention” to be, and that is what the document would be rectified to reflect, as discussed above.
49 The English and local authorities are thus aligned: a contract may be rectified not only to reflect the true agreement/intention of the parties, but also to reflect what the mistaken party believed that to be. But they do not say that a contract may be rectified to reflect what the mistaken party (on its part) would like to have agreed to, although that would not be the true agreement/intention of both parties, nor even what the mistaken party believed that to be.”
(emphasis in italics in original)
The Singapore High Court then held that applying the above to the present case, the plaintiffs still could not have claimed for rectification. This is because not only was there no agreement between the parties that 120 should have been 112, but also that the CSC did not believe that parties had agreed to 120 instead of 112. See [50] below:
“50 In the present case, what the parties agreed to was 120 units, which the plaintiffs wish the court to rectify to 112 units, on the basis that the CSC believed that 120 was the maximum allowable number of units under the applicable guidelines, when that number was actually 112. The only agreement or common intention between the parties was in relation to 120 units, not 112 units, nor whatever the maximum allowable number of units under the applicable guidelines was. The plaintiffs do not contend (nor could they) that the parties had agreed to 112 units; indeed, Oxley had made it plain that it would not agree to a number less than 120, and in the event the parties agreed on the number 120. The number 112 is not what the parties had agreed to, nor what the CSC believed the parties had agreed to; there was no actual/perceived agreement or common intention as to the number 112. The authorities on rectification for unilateral mistake do not support rectification in these circumstances.”
Conclusion. As our previous blog articles have made clear, it is vital that parties review their contract carefully before entering into the contract. DWT x Oxley is a classic illustration of why this is so important: even if you had made a mistake, you cannot simply “re-write” or rectify a contract based on your mistake. There are strict legal requirements that must be met before a contract can be rectified, and as DWT v Oxley shows, there is (in law) a difference between a mistake as to whether a contractual term should be included / omitted, versus a mistake as to the nature / quality of a contractual term.
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