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Judge Corrects Contract

01 April 2014

Judge corrects contract to reflect true bargain 

Claimants in our courts can seek various equitable remedies to prevent unfairness resulting from the application of the law.  Equitable remedies are not available as of right. The judge will consider each case and decide whether to exercise his or her discretion and grant the remedy. One example of an equitable remedy is rectification (or correction) of a contract. Rectification may be granted when a signed contract does not accurately record the agreement. Another example is the imposition of a constructive trust. A constructive trust can be used to ensure that someone is not wrongfully deprived of rights to property when someone else holds ownership of that property.

 

Mr and Mrs Robb agree to sell all their land

Mr and Mrs Robb had lived at their seaside property for over 20 years. Due to their failing health they decided to sell the property and move into a rest home. Their son Gary placed a for sale sign in the front window of the house. Mr James saw the sign and knocked at the door. Mrs Robb answered the door and explained to Mr James that they were selling everything – their house and the land behind the house that extended up the hill to the adjoining DOC or Maori land. Mrs Robb told Mr James that he would have the place all to himself. Mr and Mrs Robb signed an unconditional agreement to sell the land to Mr James. Mr James visited the property again soon after the agreement had been signed and Mr Robb pointed up the hill and said “that’s your boundary boy”, adding that it did not matter where the boundary was because it was all his.

 

The lost land

Mr and Mrs Robb’s solicitor then discovered that when Mr and Mrs Robb had purchased the property it comprised two titles, but by mistake only one of them had been transferred to them. Mr and Mrs Robb managed to have the remaining title transferred to them. It became apparent that Gary had suspicions at the time his parents signed the agreement with Mr James that this title was not in his parents’ names, but he did not tell them.

Before the purchase was completed, Gary told Mr James that there was an additional piece of land that was not included in the agreement. They came to call this land “the lost land”. Mr James’ reaction was one of confusion and disbelief – all of the Robbs had represented to him that there was nothing behind the house but DOC or Maori land and that he would have no near neighbours.

Mr James completed the purchase, intending to sort the problem out later. Soon after that, Mr and Mrs Robb transferred the lost land to Gary.

 

Fairness prevails

Mr James issued proceedings against the Robbs seeking rectification of the agreement to include the lost land. Mr James also sought orders imposing a constructive trust on the lost land and ordering Gary to transfer the land to him.

The judge considered Mr James’ delay in bringing proceedings, but granted the orders sought. She stated that she was not prepared to sanction an unconscionable outcome by upholding a contract that, in her words, patently did not reflect the bargain that had been struck.

 

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles.  Keep an eye out for next month’s column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law.  With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.   Find out more about us at www.nwm.co.nz