30 Oktober 2013 Blog

England & Wales: Correcting mistakes in English law-governed contracts

The Technology and Construction Court of the High Court of England and Wales in Liberty Mercian Limited v Cuddy Civil Engineering Limited and Cuddy Demolition and Dismantling Limited [2013] EWHC 2688 (TCC) last month considered the law in relation to misnomer, i.e. the use of an incorrect name for a party to a contract. Whilst the case shows that the English courts will exceptionally permit extrinsic evidence to demonstrate that a mistake has been made, it also reinforces what on the face of it is a simple but altogether crucial principle: the importance of ensuring that a contract names the right parties. English courts will take a strict approach and be hesitant to rectify any mistakes post-signing.

In the current case, a dispute had arisen as to whether the claimant, Liberty Mercian Limited (“Claimant”), had entered into a contract for the construction of a supermarket retail plateau with the second defendant, Cuddy Demolition and Dismantling Limited (“Cuddy Demolition”), a construction and civil engineering contractor, or with the first defendant, Cuddy Civil Engineering Limited (“Cuddy Engineering”). Both defendants were part of the Cuddy group of companies. Unbeknown to the Claimant, Cuddy Engineering was a dormant company.

Prior to the written agreement being entered into, there had already been an exchange of emails between the Claimant and a director of the “Cuddy Group”, the trading name of Cuddy Demolition. Invoices had been issued in the name of Cuddy Demolition, and payments had been made from the Claimant to Cuddy Demolition. When a draft agreement was drawn up, it referred to the “Cuddy Group”, i.e. to the party with which Liberty Mercian intended to contract. However, as contract negotiations progressed, the Claimant’s solicitor specifically asked for the name of the contract party to be changed to that of Cuddy Engineering, in the mistaken belief that Cuddy Engineering was the company behind “Cuddy Group”. When later, upon problems arising on the construction project, the Claimant sought to terminate the agreement with Cuddy Demolition for breach of contract, it transpired that there was disagreement as to who the contract parties were.

The Claimant sought, inter alia, a declaration that the contract had been entered into with Cuddy Demolition trading as “Cuddy Group” which had tendered for and was carrying out the works. It contended that the amendments to substitute Cuddy Engineering for references to the Cuddy Group were just a misnomer. The Defendants submitted that in cases such as this where there was a written agreement in the form of the contract entered into as a deed which clearly and unequivocally identified real parties, oral or extrinsic evidence was not admissible to contradict the express provisions of the written contract.

The High Court held that the dormant Cuddy Engineering rather than Cuddy Demolition was the relevant contracting party and that the identity of the contractor could not, as a matter of contract construction, be changed by relying on the principle of misnomer. In summarising the English law of the principle of misnomer, Ramsey J confirmed that a two-stage test applied:

  •  First, there must have been a “clear mistake on the face of the instrument when the document is read by reference to its background or context”. In referring to Lord Hoffmann’s judgment in the House of Lords inChartbrook v Persimmon Homes Limited [2009] 1 AC 1101, Ramsey J reinforced that in cases such as this one the court was not confined to reading the contract without regard to its background or context.
  • Secondly, it must be “clear what correction ought to be made to cure the mistake”.

In Liberty Mercian, the Claimant had made a positive choice to amend the contract party name. On these facts, Ramsey J concluded that this was not a case “where on an objective reading of the Contract having regard to the relevant background or context it can be said that there is a mistake”. Since it could not plainly be seen that the parties intended to refer in the written contract to Cuddy Demolition rather than Cuddy Engineering, this case did not come within the test of misnomer. As a result, the Claimant ended up as party to a contract with a dormant company, along with the various problems this raised when trying to recover losses.

This case reinforces the importance of ensuring that a contract names the right parties. English courts will take a strict approach and be hesitant to rectify any mistakes post-signing. In order to avoid the uncertainties and risks which a mistake may otherwise trigger, it is therefore vital to check the name and status of each party before the contract is signed.

High Court of England and Wales (Technology and Construction Court), decision dated 3 September 2013 – Liberty Mercian Limited v Cuddy Civil Engineering Limited and Cuddy Demolition and Dismantling Limited [2013] EWHC 2688 (TCC)

Stefanie Slapke, Solicitor (England & Wales)

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