D. Mistakes in Integration

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 555-565

Contenidos

• 1) Introduction.
• 2) Proving the Antecedent Agreement.
• 3) Unilateral Mistake and Rectification.
• 4) Defences and Bars to Relief.

Page 555

1) Introduction

A mistake in integration occurs when the parties reach agreement in the course of their negotiations and an error is made in the subsequent recording of the agreement in writing. In the clear case of an antecedent oral agreement between the parties that is not accurately recorded in the written agreement, the equitable remedy of rectification is available

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to either party. If satisfied that an error of this kind has occurred, the court will order reformation of the instrument to bring it into accord with their antecedent agreement.²²⁹Unlike the previously considered categories of mistake, mistakes in integration do not normally give rise to a conflict between the interest of one party in the enforcement of reasonable expectations and the interest of the other in obtaining relief from an oppressive bargain or preventing an unjust enrichment. In the paradigm case of mistaken integration of an antecedent agreement, the reasonable expectations of both parties can be easily accommodated by reformation of the written agreement.

A number of issues may arise in the context of a claim for rectification. First, the nature and extent of the prior agreement required to apply the doctrine must be considered. Second, as the proponent of rectification has the burden of persuading the court that a written agreement, typically signed by the proponent, does not accurately reflect the prior understanding of the parties, such claims have been hedged in with certain requirements concerning the nature of the proof required to establish satisfactorily the antecedent oral agreement. Further, where the mistake is unilateral in the sense that one party believes that the written instrument accords with the antecedent understanding of the parties, whereas the other party is aware, or perhaps, should have been aware of the fact that the terms of the written agreement do not do so, it must be considered whether rectification should be made available. Finally, as the remedy is equitable in nature, it is subject to various bars or defences recognized on equitable grounds. Each of these issues will be considered in turn.

2) Proving the Antecedent Agreement

Although it is often said that the party seeking rectification must establish a prior "agreement" between the parties, it is plainly the case that it is not necessary to establish the existence of an antecedent binding agreement.²³⁰The more difficult question is whether the antecedent agreement must be a complete one in the sense that the parties had agreed to all the essential terms of the agreement. Any such requirement would appear to be inconsistent with the practice in rectification cases.

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In cases involving the purchase and sale of land, for example, where the parties have, by antecedent understanding, reached agreement on the parcel of land to be transferred, a misdescription of the parcel in the subsequent writing will normally be rectified without anxious consideration of whether all the essential terms of an agreement for the purchase and sale of land had been the subject of antecedent agreement.²³¹

This point was specifically addressed, however, by the English Court of Appeal in Joscelyne v. Nissen.²³² This decision held that if the parties were in agreement on a particular point, up to the time of execution of the formal agreement, the agreement could be rectified to embody an appropriate term even though the parties had not yet reached agreement on other essential matters prior to the time of execution. In this case, a father had transferred a business to his daughter on the basis of an understanding that he would be given a right of occupation of certain premises free of all rent and outgoings of any kind. The daughter acted on this understanding for a time until ultimately advised that the written agreement did not impose such an obligation upon her. The Court of Appeal, rejecting suggestions to the contrary in some earlier authorities, ordered rectification, notwithstanding the fact that the parties had evidently not reached agreement on a number of relevant terms and conditions prior to execution. It is sufficient, then, to find a common continuing intention with respect to the matter in question. The court also indicated its view that an antecedent agreement between the parties could provide a basis for rectification even though the prior understanding had been expressed to be "subject to contract."²³³There is a significant burden of persuasion on a party who asserts that a signed written agreement does not reflect the prior intention of the parties. Indeed, it has often been suggested that there exists an unusual burden of proof in rectification claims, departing from the normal civil standard of balance of probabilities. Thus, the Supreme Court of Canada has, on previous occasions, suggested that the parties seeking rectification must establish proof of the antecedent agreement "beyond reasonable doubt"²³⁴or leaving "no ‘fair and reasonable

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doubt.’"²³⁵A less burdensome standard of "convincing proof," however, now appears to be generally accepted.²³⁶Binnie J. in Sylvan Lake Golf & Tennis Club v. Performance Industries Ltd.²³⁷expressed the current view of the Supreme Court in the following terms: "The modern approach, I think, is captured by the expression ‘convincing proof,’ i.e., proof that may fall well short of the criminal standard but which goes beyond the sort of proof that only reluctantly and with hesitation scrapes over the low end of the civil ‘more probable than not’ standard."²³⁸Noting that critics have suggested that nothing more than the ordinary civil standard proof is necessary,²³⁹Binnie J. concluded that preservation of a higher standard would avoid dilution of the "demanding preconditions to rectification" by marginal cases. It is not obvious, however, that anything other than applying the normal civil standard to a situation in which the proponent of rectification must typically overcome the substantial obstacle of a signed written agreement that the other party claims to represent the intentions of the parties is at work in this context. Further, no similar special standard is applied to claims based on collateral contracts that appear to raise rather similar issues.²⁴⁰

The types of evidence that may be found persuasive by a court entertaining a claim for rectification are illustrated by the decision of a Saskatchewan court in Bercovici v. Palmer,²⁴¹a case involving a dispute concerning the subject matter of a contract for the purchase and sale of land. The vendors claimed to have intended to sell only two business properties to the defendant. The conveyance included a cottage property that was not contiguous to the business premises. The facts that persuaded the trial judge that the cottage was not intended to be included in the transaction concerned both the conduct of negotiations and the post-execution conduct of the parties. The purchaser had expressed interest in buying the business premises but never mentioned the cottage that was not, in any respect, related to the business premises. A memorandum of instructions to the solicitor, jointly prepared by the parties, made no mention of the cottage. The purchase price

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appeared to have been calculated without the cottage being present to the mind of either party. After execution of the agreement, the purchaser did not demand possession of either the cottage or its keys, nor did the purchaser appear to have ever taken a look at the cottage after the transaction closed. The purchaser never paid taxes on or sought to insure the cottage. Although the purchaser and the vendors quarrelled from time to time about apparently less important matters, they had no discussion concerning the cottage. The agreement of sale listed the contents of the business premises but not the cottage. On these grounds, the trial judge was satisfied "beyond any fair and reasonable doubt" that the cottage was not intended to be included in the transaction.²⁴²

Where, on the other hand, the evidence in support of the antecedent agreement amounts essentially to a bare...