Rectifying a Mistake

Introduction

A written contract is almost always the document which decides the rights and obligations of the parties in any construction dispute.  Occasionally, one of the parties will confidently assert, even though the contract includes a particular term, the parties mistakenly agreed a different bargain.  The District Court recently considered this issue in Contek v Mossop. [1]

The dispute between Mossop and Contek included several other elements, but this Update only deals with Contek’s claim that Contek had not realised the contract it agreed to specified new construction drawings Contek had not seen until after the contract was formed.

The law has several ways of dealing with disputes about the terms of contracts where one party considers the terms of the signed contract to be at odds with what was really agreed.

One of the paths is for the party who considers the contract to be incorrect, to ask the Court to rectify the terms of the contract to change the terms to what the parties meant to agree.  Another path is for the aggrieved party to claim to the Court that it has been misled or deceived by the other party, or perhaps it would be unconscionable for the other party to insist on the incorrect term in the contract.

Background facts

Mossop asked for tenders on a project using an online portal called ‘Bid Contender’. The tender drawings were available on the portal and Contek submitted its tender on 23 September 2016 specifically mentioning the tender drawings on which it had based its price.

Before the contract was agreed, new “for construction” drawings were prepared, but Mossop did not circulate these drawings to Contek.

At a meeting between Mossop and Contek on 28 September 2016, before the contract was signed, the parties discussed Contek’s tender and some minor alterations were agreed together with a discount to the price quoted. There was no mention at the meeting of the new for construction drawings.

On 29 September 2016, Mossop’s estimator sent an email to Contek accepting the tender and listing the minor variations and discount which had been agreed on the previous day.

Mossop then provided the written contract to Contek.  Contek signed the contract and did not notice an appendix to the contract included an altered revision number for some of the listed drawings.

At the trial, the evidence showed an appendix to the contract listed the drawings and other documents. 

The appendix included 17 columns indicating successive issue dates of drawings and ran to about 14 pages. On pages 5 and 6 in the second and last columns appeared changed revision numbers for 9 drawings.  

After construction was underway, Contek claimed a variation arose from the changes between the tender drawings on which it had based its price and the construction drawings, issued to Contek after the formation of the contract.

Mossop said Contek was contractually bound to follow these later versions of the drawings and on that basis was not entitled to the variation it had claimed.  

The parties fell into dispute about this and other variations and ultimately spent 10 days in the District Court.

What is Rectification of a contract?

Rectification is a remedy concerned with a mistake in a contract. The purpose of rectification is to make the contract conform to the ‘true agreement’ of the parties.

The ‘true agreement’ may be shown by a concluded earlier agreement or the continuing common intention of the parties up to the time the contract was formed.

Any common intention must be shown by admissible evidence and proved to a high standard. Otherwise, the usual position that the written contract is the true agreement of the parties cannot be displaced.

The applicant must show precisely what it claims the contract should have said.

It is necessary to show the actual intention of each of the parties, but this intention must be objectively apparent from the words and conduct of each party.  In other words, a court, in determining whether the burden of proof is discharged, may be said to view the evidence of intention objectively, in the sense that it does not merely accept what a party says was in their mind, but instead considers and weighs admissible evidence showing the intention.

Proof of a party’s undisclosed intention during negotiations is not sufficient.  Where the parties do not express themselves in terms of their intention in contractual negotiations, it will be necessary to prove some manifestation of their intentions from their words or conduct as the basis for inferring the requisite common intention.  

Whilst it is settled that an earlier agreement is not essential to the grant of rectification, the absence of an outward expression of agreement may be relevant to whether the necessary burden of proof has been discharged.

What the Court found

Her Honour found that Mossop’s email accepting Contek’s tender, making specific reference to the tender price and some minor adjustments to that price arising from the meeting of the previous day, was sufficient proof that the parties had formed their agreement based on the tender.  

On that basis, Her Honour found the contract should be rectified so it referred only to the tender drawings.  

Her Honour found Mossop’s estimator made a mistake when he accepted the tender and had not intended to specify the for construction drawings in the contract. On this basis, both parties were mistaken when they formed the contract, and the contract was to be rectified by reason of the mutual mistake.

Alternative findings

Her Honour also found, even if Mossop’s estimator was not mistaken, the contract should be rectified by reason of the unilateral mistake of Contek, as it would otherwise be unconscionable for Mossop to insist upon the for construction drawings and deny the variation.

Finally, Her Honour found Contek’s claim for misrepresentation was upheld.  Her Honour said Mossop’s denial that it had any obligation to ensure Contek read and understood the contract when it accepted the contract should be rejected. 

This rejection was “in the light of all relevant circumstances constituted by acts, commissions, statements or silence”. 

Mossop’s representatives’ silence in not disclosing the different scope of works to Contek should be accepted as misleading and deceptive, even if the silence was inadvertent.   

Her Honour said it was entirely reasonable for Contek’s director to expect one of Mossop’s representatives would have told him that the scope of works had changed from the tender drawings if that had occurred, particularly when only the minor additional works had been listed in the email accepting the tender.

Conclusion

While Contek was successful in obtaining orders for rectification, the remedy is generally difficult to obtain. 

Parties should, as a matter of general practice, ensure they carefully read the terms of their contract before they sign them. 

It is not uncommon for versions of drawings to change between tender phase and construction phase.  Both parties should carefully review the listed drawing numbers in their contracts at the time of signing to avoid this type of dispute.


[1] Contek Pty Ltd v Mossop Group Pty Ltd [2024] SADC 1

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