The awkward case of Wilkes v. Wellington highlights the importance of precision. It relates to two option agreements over two plots of land (one over each) which were in similar terms.
Landowner Wilkes granted an option over land to Wellington for a fee of £5,000, giving Wellington a right to buy the land for £150,000 at any time over the subsequent three years. He also granted Wellington a security over the land to protect the right to buy. Wellington had 42 days to pay the £5,000 option fee, but didn't do so on time. By then the security over the land was already pending registration at the Land Register. Paying the option fee on time was of course essential to the agreement, so when Wellington failed to make the payment, the option agreement ended, and Wilkes wanted the security discharged (or application for it withdrawn).
Instead, Wellington tried to reawaken the agreement, emails with Wilkes were exchanged, and a formal legal variation of the agreement made to the effect that Wellington now had 42 days "to exercise the option" (i.e. pay the £150,000 and buy) rather than just to pay the option fee and continue to enjoy the 3-year right to buy. Again, no timely payment was made and so the option agreement as varied was (in Wilkes' view) at an end again. Wilkes asked the court to have the security discharged on the basis that thee agreement it secured was at an end.
Wellington disagreed, based on the emails exchanged with Wilkes, insisting that the variation that dramatically shortened his option period was wrong and should be rectified to reflect his understanding of those exchanges with Wilkes. There is a reasonably precise legal process for this to happen: essentially the Court must be persuaded that the document to be rectified was meant to give effect to an earlier "common intention" of the parties but fails to do so. As you can imagine, this expression has generated a forest of caselaw and legal opinion, but in this case, Wellington was asking the sheriff to analyse these emails, find that common intention, and keep his 3-year option alive.
The sheriff found that there was some common intention in the email exchange and importantly that although there were some new terms, the intention was indeed to reawaken the original agreement subject to these changes. However, the sheriff still refused to rectify because doing so would have given Wellington a "gratuitous benefit" – the emails said Wellington didn't have to pay the option fee until the title was registered, which was "undesirable" according to the sheriff.
Wellington appealed against the sheriff's decision. The trouble is that rectification is not about whether the outcome would be desirable. As Wellington's appeal Counsel pointed out, "[t]he sheriff had embarked on a critique of the deal, which was not relevant to rectification." While the appeal court agreed that rectification is not "to assess the reasonableness of what the parties agreed", the appeal still failed because they disagreed with the original sheriff that there was enough common intention for Wellington to succeed.
Instead of considering both the original agreement and the subsequent emails together, they disregarded the original agreement because it had lapsed, rendering the emails as the sole source of common intention and therefore the only conduit through which the original agreement could be reintroduced and considered. The court found the emails difficult, discussing "selected elements only" and crucially that they did not show "even on the balance of probabilities" an intention to reawaken the original agreement to complete the picture given in the emails.
The common intention from the emails was only that a new agreement would "all be brought together in the document to come" and was therefore no more than an agreement to agree, which does not have anything like the force needed for rectification.
Perhaps this was still a close-run thing. The emails could have been clearer, and the variation document scrutinised more closely before it was signed off. It also didn't help that a notice required by the original agreement was not served when the option fee was eventually tendered.
Even if it was close, the case reminds us to be precise and complete in all communications, regardless of how informal, when the implications are intended to be significant, and that rectification must always remain a carefully controlled remedy.
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