Traditional Structures Ltd v HW Construction Ltd

Rectification for unilateral mistake requires proof that one party mistakenly believed the document contained a particular term, the other party knew of the mistake, failed to correct it, and would benefit from it. The relevant knowledge includes actual knowledge, deliberately shutting one’s eyes to the obvious, and recklessly failing to make inquiries which an honest and reasonable person would make. The court must then decide whether the conduct was dishonest or unconscionable. A contract for services may remain binding even where remuneration for part of the work has not been expressly agreed. In that event, Supply of Goods and Services Act 1982, section 15 supplies an entitlement to a reasonable sum.

The claimant subcontractor tendered to supply and install structural steelwork and roof cladding. The version of its tender sent to the defendant contained a price for steelwork but omitted the separate price for cladding. The defendant accepted the tender and later contended that the single price covered both elements.

The claimant sought rectification for unilateral mistake and, alternatively, a reasonable price for the cladding. The issues were whether the defendant knew, or deliberately failed to inquire, that the tender contained an error; whether its conduct justified rectification; and whether a concluded contract existed despite the absence of an express cladding price.

1. Rectification. The court adopted the four requirements stated by Buckley LJ in Thomas Bates & Son Ltd v Windhams (Lingerie) [1981] 1 WLR 505, as accepted in George Wimpey UK Ltd v V I Construction Ltd [2005] EWCA Civ 77. The claimant had to show that it believed the document contained a term, that the defendant knew of the omission and its cause, that the defendant failed to draw it to the claimant’s attention, and that the mistake benefited the defendant.
2. The defendant’s managing director knew, or at least shut his eyes to the obvious and recklessly failed to make the inquiries an honest and reasonable person would have made. Applying the analysis in Baden v Société Générale pour Favoriser Le Développement du Commerce et de L’Industrie en France SA [1993] 1 WLR 509 and Agip (Africa) Ltd v Jackson [1990] Ch 265, those circumstances amounted to actual knowledge. His conduct was also unconscionable and beyond fair dealing, applying CNT v Cooper [1995] Ch 259.
3. The court construed the tender as identifying two separate elements of work. The single stated figure related to structural steelwork, while no express price had been stated for cladding. The claimant therefore established rectification for unilateral mistake.
4. The alternative claim also succeeded. The parties had agreed all material contractual terms apart from the cladding remuneration. That omission was not fatal to contract formation. Section 15 of the Supply of Goods and Services Act 1982 applied, requiring payment of a reasonable sum. The parties agreed that the reasonable price was £34,754.17 for the completed cladding work.
5. The claimant succeeded on both claims. The court was to hear counsel on the appropriate order.

First-instance decision. No prior or appellate decision is stated in the judgment.