Under a waste recycling contract a local authority was entitled to fixed and variable payments. An “Income Generating Payment Mechanism” identified the annual fixed payment as £500,000 and recorded that it was indexed for inflation. When the contract documents were put together, however, an earlier and incomplete version of the IGPM, which did not refer to indexation and had gaps that made the contract inoperable, was included. The error was not identified before the contract was concluded and the council asked the court to rectify the contract by substituting the correct version of the IGPM.
The case law says that a party seeking rectification for common mistake must show that:
• the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;
• there was an outward expression of accord;
• the intention continued at the time of the execution of the instrument sought to be rectified; and
• by mistake the instrument did not reflect that common intention.
The court ruled that all of these ingredients were in place to permit rectification. The ingredients of unilateral mistake had also been shown, the defences put forward failed and the court ordered that the contract should be rectified by substituting the correct version of the IGPM.