The House of Lords has delivered a sharp reminder of the importance of drafting contracts clearly and accurately. A dispute between a developer and the owner of the development site turned on the interpretation of the wording of the contract formula for calculating the owner’s share of the sale proceeds. The House of Lords confirmed that a court can, in construing documents, correct mistakes, if it is clear that something has gone wrong with the language and it is also clear what a reasonable person would have understood the parties to have meant. It also confirmed that a court cannot refer to pre-contract negotiations to establish what a contract means, but it can refer to the negotiations for other purposes, for example, to establish a fact that may be relevant to the background or to support a claim for rectification or estoppel.

Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38