Rectifying Bad Bargains?
Wilkes v Wellington [2024] SAC (Civ) 40
Introduction:
The Sheriff Appeal Court issued its opinion in the appeal of Wilkes v Wellington [2024] SAC (Civ) 40 on 28th August 2024. The dispute centres around two sets of option agreements for the purchase of two plots of land.
The first set of agreements provided for the payment of an option price of £5,000 in exchange for a three-year option period to purchase each plot at a price of £150,000. Mr Wellington was given a 42 day period “to pay the option price” of £5,000 and a security over the title. When paid this allowed Mr Wellington the privilege of the option period to buy the plots. Mr Wellington failed to exercise his right during the three-year option period and the agreements came to an end.
However, Mr Wellington desired to resurrect the agreement. As such, Mr Wellington sent to Mr Wilkes letters of variation which amended and renewed the original agreements. These amendments allowed for a 42 day period “to exercise the option” of buying the plots rather than to just “pay the option price” as in the original agreements. This was a fundamental change compared to the first agreements as in the new agreements only 42 days were available to purchase the plots. Mr Wellington sent these amended agreement by email to Mr Wilkes who confirmed he was happy with them. Mr Wellington did not exercise the new option to purchase the plots during the given 42 day period and the new agreements came to an end.
The option period over, Mr Wilkes raised the action to seek a declarator that the securities held no extant obligation. Mr Wellington objected and requested that the letters be rectified to exhibit the common intention of the parties. He argued that the common intention was the amended agreements were to have the same timescale as the original agreements; he would have three years to purchase the plots.
The Sheriff rejected a proposed rectification of the varied agreements by Mr Wellington.
Bad Bargains:
In the Appeal decision, the court was clear on the limits of the rectification doctrine. Sheriff Ross states “The exercise of rectification is to remedy errors of expression, not to imply terms or to assess the reasonableness of what the parties agreed.”
It is plain that it is not in the remit of the court to assess how reasonable agreements between parties are. When Sheriff Ross states that “It is always open to parties to make a bad bargain” it should provide a stark warning for anyone preparing to enter into a contract. Rectification will not provide an easy escape route. The court’s objective when rectifying an agreement is to represent the mutual intention of the parties it binds. It will not be to change the terms to be more equitable for both parties.
In this case the court deemed that the expressed common intention of the parties was sufficiently clear. “The Variation Letters, on the available evidence, mirrored the defender’s instructions”, and therefore no rectification was required.
The Judgement can be found here:
2024sacciv40-luke-alexander-wilkes-against-edward-andrew-wellington.pdf (scotcourts.gov.uk)
If you want to discuss any of the issues raised in this Blog, Eric Baijal would be happy to help and you can contact him on emb@bbmsolicitors.co.uk or speak to him on 01955 604188