RECTIFICATION

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Points To Learn:
Intro.: Contractual Stages
What is Rectification?
Why Rectification?
When Rectification? (Grounds)
Who can Apply for Rectification?
What are the Conditions for Rectification?
Role of the court in Rectification: How to Find
Common Intention of the Parties?
Rectification of Contracts Relating to Land in
Malaysia: Defeating Indefeasibility?

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 Intro.: Contractual Stages

Negotiating an The Antecendent

Agreement agreement
(Common intention of the parties)

MISTAKE FRAUD

The Written Contract

Framing the Instrument
(Instrument)

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Section 30 SRA

When, through fraud or a mutual mistake

of the parties, a contract or other
instrument in writing DOES NOT TRULY
EXPRESS THEIR INTENTION, either
party, or his representative in interest, may
institute a suit to have the instrument
rectified

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And if the court find it clearly proved that there
has been fraud or mistake in framing the
instrument, and ascertain the real intention of
the parties in executing the same, and ascertain
the real intention if the parties in executing the
same, the court may in its discretion rectify the
instrument so as to express that intention, so far
as this can be done without prejudice to rights
acquired by third persons in good faith and for
value.
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Lord Denning in Frederick v William Pim
[1953] 2 QB 450:
In order to get rectification, it is
necessary to show that the parties were in
complete agreement on the terms of their
contract, but by an error wrote them down
wrongly.

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What Is Rectification?

A discretionary equitable remedy whereby

an instrument which does not accord with
the intentions of the parties to it, due to
fraud or mistake, may be corrected.
Note:
It is not the contract that is rectified but
the instrument recording the contract.

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Why Rectification?
Equity looks to the intention, not the form
It is the role of equity to uphold the
intention of the parties in an agreement.
If the instrument recording the agreement
does not reflect the true intention of the
parties due to common mistake or fraud,
then equity will intervene and order
rectification of the instrument/ written
contract.
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Section 32 SRA:

In rectifying a written instrument, the

court may enquire what the instrument
was intended to mean, and what were
intended to be its legal consequences,
and is not confined to enquiry what the
language of the instrument was intended
to be.

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When Rectification?

Grounds for rectification:

1) Mutual Mistake; or
2) Fraud
Burden of proving mistake or fraud is on
the party seeking rectification. (Tay Tho
Bok v Segar Oil Palm Estate Sdn. Bhd.
[1996] 3 MLJ 181 at 197)

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What is Mutual Mistake?

Mutual mistake IS NOT unilateral mistake.

Tham Kong v Oh Hiam& Ors. [1968] 1 MLJ
44, Barakbah LP:
The mistake is mutual where the parties
misunderstand each other and are at
cross purposes. In unilateral mistake, one
only of the parties suffers from some
mistake.
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Southwind Development Sdn Bhd v Hass
Plantation Sdn Bhd [1996] 5MLJ 85

For a mistake to be mutual, it must be

common to both parties, and it is essential
that the parties should have had precisely
the same intention on the point on which
the document is inaccurate.

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See cases on Rectification on Grounds of
Mistake:
Frederick v William [1953] 2 QB 450 (the
feveroles case): No common mistake
Yuson Bien & Anor. v Bankers Trust Co. [1980] 1
MLJ 32: No mutual mistake
Oh Hiam v Tham Kong [1967] 1 MLJ 65:
common mistake found and confirmed by Privy
Council in [1980] 2 MLJ 159
Chee Lui Teen v Kiet Hoe Development S/B
[1988] 1 MLJ 514: No mistake
Tay Tho Bok v Segar Oil Palm Estate S/B [1996]
3 MLJ 181: No mutual mistake
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 Oh Hiam v Tham Kong

A widow took out Letters of Administration

of her late husbands estate consisting of
6 plots of rubber land in Gombak and a
plot of land in Setapak where the family
home stood.
She intended to sell the 6 plots of rubber
land to the purchaser but in the application
to sell the land, mistakenly included the 7 th
plot i.e. the land in Setapak.
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 Held:

Rectification ordered.
Judge was satisfied that during the course
of negotiations between the parties that
there was no mention about the land in
Setapak.
Mistake committed during the preparation
of the agreement by the broker who
mistakenly included the 7th plot as forming
part of the rubber estate.
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Tay Tho Bok v Segar Oil Palm Estate S/B

Plaintiffs had entered into an agreement to purchase

from the defendant 11 pieces of land for an agreed price.
After paying 10% deposit and signing the agreement, the
plaintiffs found that parts of the land had structures used
for water pipelines and electricity transmission cables by
various utility bodies.
Plaintiffs claimed that the sale of land should not include
these structures and sought a court order to rectify the
agreement so that the total purchase price be lessened
to exclude the portions of land with the water pipes and
cables.

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 Held:

There was no mutual mistake. Both

parties agreed to sell and purchase the
lands in the 11 documents of title. The
plaintiffs and the defendant did not
misunderstand each other and neither
were they at cross-purposes.

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Fraud
Where there is no common mistake but only
unilateral mistake, the party seeking rectification
may only succeed if it can prove fraud.
See the decision in Segar Oil Palm Estates
case where the court found that there was
fraudulent misrepresentation on the part of the
defendant relating to the pipelines and cables,
Court in this case thus, ordered specific
performance of the rectified agreement and
damages.

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Who Can Apply for Rectification?

S.30 mentions that the applicant can be

either party, or his representative in
interest

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Conditions for Rectification:

The applicant for rectification must prove:

1) Either Mutual Mistake or Fraud;
2) Strong irrefragable evidence of
common and continuing intention of the
parties;
3) That the rectification would not
prejudice the rights of bona-fide
purchasers for value.(See words ending
s.30 and illustration (a))
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Strong Irrefragable Evidence?

Lord Chelmsford in Fowler v Fowler

(1859):
evidence that cannot be refuted or
overthrown
The mistake must be proved such as to
leave no fair and reasonable doubt that
the deed does not embody the final
intention of the parties.
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Common and Continuing Intention?
In YUSON BIEN & ANOR V BANKERS TRUST
CO LTD [1980] 1 MLJ 32
Purchasers applied for rectification on the
ground of common mistake
The Federal Court stressed on this element
you do not need a prior contract but a prior
common intention. The burden of proving this
common and continuing intention lies upon the
party claiming that the written contract should be
rectified.
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Role of the Court: Finding the Real
Intention of the Parties
Lord Denning in Frederick v William:
In order to ascertain the terms of their
contract, you do not look into the inner
minds of the parties- into their intentions-
You look at their outward acts, i.e. at
what they said or wrote to one another in
coming to their agreement, and then
compare it with the document which they
have signed.
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Section 31 SRA:

For the purpose of rectifying a contract in

writing, the court must be satisfied that all
the parties thereto intended to make an
equitable and conscientious agreement.

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Court Not to Rewrite Agreement

Justice Lim Beng Choon in Chee Lui Teen

v Kiet Hoe Development S/B at p.518 :
a court should be cautious in allowing
a rectification of any written instrument. It
is not the function of the court to re-write
an agreement which the parties had
entered into

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Specific Performance of Rectified
Contract
See s.33 SRA
A contract in writing may be first be
rectified and then, if the plaintiff so prayed
in his plaint and the court thinks fit,
specifically enforced.
Segar Oil Palm Estates case.

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Does Rectification of Contracts Relating
to Land Effect Indefeasibility of Title?
No, see decision of the Privy Council in Oh Hiam
v Tham Kong [1980] 2 MLJ 159.
Provisions of the land law on indefeasibility of a
registered proprietors title do not oust the
intervention of the court to grant a remedy in
personam.(See p.164 of the case.)
Thus, court may order rectification and the effect
would be that the registered proprietor would
defeat his own title.

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Grounds for refusal of rectification

Discretion remedy
An alternative suitable remedy
Delay defeats equity-laches
A bona fide purchaser
Acquiescence- consent to the mistake
either oral or conduct
Mistake is unilateral
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Conclusion:

Rectification is an equitable discretionary

remedy in respect of contracts where
there is mistake or fraud and in exercising
the power to grant this remedy, the court
must be cautious and ensure that all the
conditions are satisfied.

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