Surgicraft Ltd v Paradigm Biodevices Inc [2010] EWHC 1291 (Ch)

In this case, the High Court revisited the principles of rectifi cation confi rmed by Lord Hoffmann in Chartbrook, and applied them to a contract containing an entire agreement clause.  

The dispute concerned an exclusive distribution agreement between the parties, which Surgicraft terminated on the basis of its change of control. Paradigm sought compensation; however, no provision was made in the contractual documentation for compensation in the event of such a termination, and so Paradigm argued that there was a mistake in the documentation and it ought to be rectifi ed to refl ect the parties’ common continuing intention.

The contract contained an “entire agreement clause” which provided that the written terms amounted to the “entire understanding between the parties with respect to the subject matter and superseded all prior agreements, negotiations and discussions between the parties relating to it”. Surgicraft denied the common continuing intention alleged by Paradigm and relied on the “entire agreement” clause as meaning that rectifi cation was not available at all, or the parties were bound by a contractual estoppel, or that it showed the parties’ intention to be bound by the document regardless of prior or other intentions.

The judge rejected Surgicraft’s arguments, and rectifi ed the agreement. He adopted the reasoning of Roger Cooke J in JJ Huber Ltd v The Private DIY Company Ltd (1995) 70 P&CR 33 and extended it to common mistake (rather than unilateral mistake as in that case), and held that an entire agreement clause does not prevent rectifi cation. Rather, its purpose is to limit possible contractual claims arising from dealings outside the contract.  

Comment

The argument made – that an entire agreement clause in effect ousted any prospect of rectifi cation – was interesting, but ultimately failed. This case illustrates the court’s continuing willingness to give effect to parties’ objective intentions by preferring a commercially sensible view of what they intended to a fi ne analysis of the words of the contract. Although such an approach is often more relevant in the context of construction of contracts rather than rectifi cation, they are essentially two tools by which the court can give effect to the actual intentions of the parties, as evidenced by the factual matrix and (with rectifi cation at least) pre-contractual negotiations.