Contracting With The Correct Party: Misnomers And Contractual Mistakes

If you find an error in a contract it is important to know if that error can be rectified without disrupting the entire agreement. A misnomer, or an inaccurate use of a name, is capable of ruining a contract and carries the possibility of making a contract unenforceable. Based on the misnomer principle a court can determine the meaning and the legal effect of a contract where mistakes are made but past use of the doctrine has not provided a great deal of certainty as to how the courts will interpret it in specific cases.

Modifying contractual terms

The 2013 case Liberty Mercian Limited v Cuddy Civil Engineering Limited (CCEL) and Cuddy Demolition and Dismantling Limited (CDDL) discussed the possibility of modifying contractual terms or the names of the contracting parties where a writing error has occurred. It also considered whether extrinsic facts could elucidate mistakes in a contract.

The claimant, Liberty, signed a contract with the defendant, CCEL, for the construction of a new retail platform. The contract named CCEL as the contractor although CDDL carried out the work. Due to problems with the project, Liberty wished to terminate the contract and sue CCEL. However, CCEL was a dormant company which had never traded before and had no assets. Thus Liberty amended its claim to include CDDL as a defendant in the lawsuit, using the argument that the contract had a writing error and where it said CCEL it should have said CDDL. An important detail was that CCEL and CDDL were part of the same corporate group - Cuddy Group; with common directors and shareholders. Cuddy Group was the one that negotiated with Liberty, but after researching at Companies House, Liberty requested that the main contract and the collateral warranty were signed by CCEL.

Liberty argued that instead of CCEL, the contract should have mentioned CDDL; it claimed this represented a misnomer. The defendants argued that the contract was clear and named CCEL not CDDL and added that, as per the earlier case of Dumford Trading v OAO Atlantrybflot [2005], the consideration of extrinsic evidence should be limited.

Court findings on misnomer

The court reviewed the law in relation to misnomer and clarified that some external information may be considered for purposes of correcting contracts. However, it was important that the mistake should be clear enough to enforce a correction of an agreement.

A “clear mistake” was defined as something that has “commercial nonsense” or “gone wrong with the drafting of the document”. Considering the principle of general contractual construction, the court decided that a “clear mistake” had not happened. Liberty and CCEL were the parties that signed not only the main contract, but also the collateral warranty.

The court based its decision on the 2009 case Chartbrook Limited v Persimmon Homes Limited that defined two conditions to succeed on a claim for misnomer: firstly there existed a clear language mistake in the contract considering its background and secondly that a clear proposal for correction was possible. The court held that, despite the fact CDDL had actually carried out the work, Liberty and CCEL were the named contracting parties; which meant that a clear writing error had not occurred.

Comment

This case not only enlightened the doctrine of misnomer but also created a precedent. In particular it meant that background evidence could be used to identify whether there is a misnomer or not. For specialist advice about contractual disputes or correcting contracts contact Peter Gourri today by email PGourri@rollingsons.co.uk or telephone 0207 611 4848.