Chartbrook Ltd v Persimmon Homes Ltd [2009]
Share
Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 is an English contract law case concerning the interpretation of contracts. The case established the red ink rule, allowing courts to rearrange contractual language to achieve a commercially sensible meaning. Additionally, it reaffirmed the English law principle that pre-contractual negotiations are generally inadmissible when construing a contract.
Persimmon agreed to build residences on Chartbrook's land and sell the properties, with Chartbrook making payments based on a formula. The parties disagreed on the interpretation of the formula, leading to a dispute about the amount due. Persimmon argued for rectification or consideration of pre-contractual negotiations.
The House of Lords held in favour of Persimmon's interpretation, emphasising the red ink rule's flexibility in correcting contractual language. The court rejected the consideration of pre-contractual negotiations, affirming the rule's consistency and long-standing application. The judgment clarified that while negotiations are generally irrelevant, there may be exceptional cases where previous communications between parties are relevant as part of the background.
Lord Hoffmann, in his opinion, acknowledged the potential difficulties in distinguishing negotiations from provisional agreement and argued against departing from the exclusionary rule. The judgment emphasised the need for a strong case to demonstrate linguistic mistakes and highlighted the availability of rectification and estoppel by convention as safety devices to prevent injustice.
This case is significant in contract law for establishing the red ink rule, allowing courts to rearrange contractual language for a commercially sensible meaning. It also reaffirmed the general inadmissibility of pre-contractual negotiations when interpreting contracts, while acknowledging the potential relevance of negotiations in exceptional cases.
Persimmon agreed to build residences on Chartbrook's land and sell the properties, with Chartbrook making payments based on a formula. The parties disagreed on the interpretation of the formula, leading to a dispute about the amount due. Persimmon argued for rectification or consideration of pre-contractual negotiations.
The House of Lords held in favour of Persimmon's interpretation, emphasising the red ink rule's flexibility in correcting contractual language. The court rejected the consideration of pre-contractual negotiations, affirming the rule's consistency and long-standing application. The judgment clarified that while negotiations are generally irrelevant, there may be exceptional cases where previous communications between parties are relevant as part of the background.
Lord Hoffmann, in his opinion, acknowledged the potential difficulties in distinguishing negotiations from provisional agreement and argued against departing from the exclusionary rule. The judgment emphasised the need for a strong case to demonstrate linguistic mistakes and highlighted the availability of rectification and estoppel by convention as safety devices to prevent injustice.
This case is significant in contract law for establishing the red ink rule, allowing courts to rearrange contractual language for a commercially sensible meaning. It also reaffirmed the general inadmissibility of pre-contractual negotiations when interpreting contracts, while acknowledging the potential relevance of negotiations in exceptional cases.
