Clarification of the test for rectification for common mistake

Insights /

"… we are unable to accept that the objective test of rectification for common mistake articulated in Lord Hoffmann's obiter remarks in the Chartbrook case correctly states the law.” The Court of Appeal clarifies test for rectification for common mistake in FSHC Group Holdings ltd v GLAS Trust Corporation Ltd [2019] EWCA Civ 1361.

Rectification of a common mistake

Where the parties to a written contract are mistaken that the contact records their common intention, the contract may be rectified by the court to reflect that common intention. Cases involving common mistake inevitably result from the parties disputing that a common mistake has been made. With the parties at logger-heads, how does the court evaluate the parties’ intentions?

In Chartbrook v Persimmon Homes Ltd [2009] 1 AC 1101, Lord Hoffman observed that the parties’ intentions were to be assessed objectively, which ran contrary to established authority that held that actual intention was relevant. Lord Hoffman’s comments in that case were not however relevant to the decision in Chartbrook and were not binding precedent, but the comments were subsequently applied by the parties and the court in Daventry District Council v Daventry & District Housing Ltd [2011] EWCA Civ 1153 leading to uncertainty as to the correct approach. The Court of Appeal, however, has recently determined that the correct test for rectification is not wholly objective but that different tests are applicable in different scenarios with one scenario requiring a subjective assessment of the parties’ understanding of each other’s intentions.

FSHC Group Holdings ltd v. GLAS Trust Corporation Ltd [2019] EWCA Civ 1361

The claim was for the rectification of two deeds executed by FSHC in November 2016. Under a complex financing transaction in 2012, FSHC was required to provide security over a shareholder loan. In 2016, it was discovered that the security was missing, and perhaps had never been provided, which could have led to an event of default under the financing agreements. Against the backdrop of remedying the position before the next compliance reporting date, FSHC entered into deeds to accede to two pre-existing security agreements. However, the effect of acceding to these agreements was not only to provide the missing security but for the FSHC to undertake additional, onerous obligations.

At first instance, the judge concluded that the parties subjectively had a common intention to execute a document that did no more than to provide the missing security. He, therefore, granted rectification of the deeds so as to exclude the additional obligations from their scope.

On appeal, GLAS argued that the test for rectification was purely objective.

In dismissing the appeal the Court of Appeal held that the test for assessing intention differed between two different scenarios.

1. An antecedent agreement

Where the parties produce a written contract to incorporate the terms of an agreement between them but that document does not accurately reflect that prior agreement, the terms of that prior agreement must be determined objectively to hold the parties to what they had agreed.

2. No agreement prior to the written contract

Where, as in the FSHC case, the parties had not actually reached a binding agreement prior to producing the written contract but nevertheless had a common continuing intention in respect of a particular matter the Court of Appeal held the position is different. The Court of Appeal concluded that a party should not be allowed to enforce the terms of a written document that are inconsistent with what both parties intended (similar to rectification for unilateral mistake).

In such a scenario, the Court of Appeal said, the basis of rectification is “entirely concerned with the parties’ subjective states of mind”.

The Court of Appeal compared the objective approach to rectification where there was a prior agreement with the application of an objective test in interpretation of contracts. Objective interpretation of contracts and proceeding on the assumption that specific words were intended to have specific meanings leads to a degree of certainty as to how provisions will be interpreted.

In the absence of a binding agreement, however, the rationale for objective interpretation of the terms falls away because there are no agreed terms for the objective observer to give meaning to. Instead, what must be demonstrated is the parties’ actual common intention which is a subjective assessment based on what the parties actually thought, as well as what they outwardly said and did, and the parties’ intention should be assessed subjectively.


The Court of Appeal’s clarification now means that there are two different tests for rectification depending upon the nature of the contract in respect of which rectification is sought.

If the written document merely incorrectly records the parties’ agreement the test will be an objective one. If, however, the parties do not reach a binding agreement before the written contract is produced the test will largely be a subjective assessment of the parties’ actual common intention.

Despite the clarification, however, successfully obtaining rectification of a written contract remains no less difficult.

Ben Moon

Ben Moon Legal Director

Related sectors:

Related news & insights

Insights / Climate Change Litigation Continueth – The Scottish Case: Greenpeace v. BEIS and the OGA (and BP too)

15-10-2021 / Energy & Infrastructure

The Scottish Court of Session has declared that dealing with the global environmental impact of the consumption of oil is a political matter for the UK Government, not a legal issue for the UK Courts in considering the validity of approval to drill new oil wells in a single field.

Climate Change Litigation Continueth – The Scottish Case: Greenpeace v. BEIS and the OGA (and BP too)

News / AfCFTA and Energy & Infrastructure

11-10-2021 / Energy & Infrastructure, Maritime

This article is the third in a series of articles looking at the impact of the African Continental Free Trade Area (the “AfCFTA”) on various practice areas and industry sectors that our clients operate in. This article focuses on Energy and Infrastructure and addresses some of the key questions our clients have asked us.

AfCFTA and Energy & Infrastructure

Insights / Supreme Court clarifies lawful act of duress

21-09-2021 / Energy & Infrastructure

In Times Travel (UK) Ltd v Pakistan International Airlines Corporation (Rev 2) [2019] EWCA Civ 828, the Supreme Court confirmed the existence of the doctrine of ‘lawful act duress’ under English law and its limited scope in commercial transactions.

Supreme Court clarifies lawful act of duress

News / Shell agrees pay out to Nigerian community to settle long-running oil spill dispute

17-08-2021 / Energy & Infrastructure

In 1991, the Ejama-Ebubu people began a legal campaign to hold Shell Nigeria (“Shell”) accountable for an oil spill that occurred in 1970. Shell accepted that these oil spills had occurred, but argued that these were caused by “third parties” during the Biafran war, for which Shell should not be held liable. Almost 20 years later, in 2010, a Nigerian Federal court ordered Shell to pay 17 billion naira to the Ejama-Ebubu community. Shell has unsuccessfully attempted to challenge this ruling over several years and, in November 2020, the Nigerian Supreme Court ruled that Shell could no longer appeal the decision.

Shell agrees pay out to Nigerian community to settle long-running oil spill dispute

News / The Bribery Act: ten years on

19-07-2021 / Energy & Infrastructure

The Bribery Act: ten years on

Quick links

The Legal 500 2021

“Very available and responsive to company developments in real time. Frank, clear advice – not just the ‘easy’ answer.”

The Legal 500 2022

“The solicitors who have handled our employment related issues are of the highest quality in terms of their specialist area of expertise, their professionalism and their approach to us as clients and as people. Special mention has to be made of Laura Livingstone. Laura became a key member of our team and felt more like a colleague than an external adviser – a colleague you could rely upon. Laura’s attention to detail, professionalism and responsiveness was second to none. Laura has come to know and understand us as individuals and this has enabled her to personalise her advice and even sometimes to preempt our future requirements. We have a very special and extremely valuable relationship with her and the firm.”

- The Legal 500

The Legal 500 2022

“Ince are an excellent “fit” with our specific needs. The firm has consistently provided a broad range of personnel-related advice and in our experience that advice has been consistently of the very highest professional standard: it has been timely, comprehensive, accurate and at a cost which is commensurate with the budget of an organisation of our size.”

- The Legal 500

The Legal 500 2022

“The firm has an unusually high degree of insight into the practices and policies required by the Gambling Commission as regards compliance with its own requirements and conditions – particularly Andrew Tait, derived from his previous in-house experience.”

- The Legal 500