Rectification of a Share Purchase Agreement - Make Sure Your Contracts Are Clear

However, in a recent case, the court ordered the rectification of a share purchase agreement (SPA) and the related disclosure letter.

Persimmon Homes Ltd v Hillier

The defendant sold the share capital in two companies to Persimmon Homes. These two companies held interests in four of six plots of land making up a potential development site. The remaining two plots were owned by another of the defendant's companies but the shares in that company were not acquired by Persimmon Homes under the SPA.

Persimmon Homes argued that the intention of the parties was that they would acquire the whole of the development site, including the two plots owned by the other company.

What Did the Court Say?

The court considered that the correspondence and course of the negotiations suggested that Persimmon Homes would acquire all of the sites regardless of which company in the defendant’s group was the owner.

The court therefore ordered rectification of the SPA so as to include the two additional plots of land within the property warranties. This amendment, together with an amendment of the disclosure letter also ordered by the court, had the effect that Persimmon Homes could sue the defendant for breach of warranty.

Best Practice

English courts require a party seeking rectification of a contract to satisfy a high evidential burden so such cases are rare. This case demonstrates the importance of clear and precise drafting in contracts, particularly the documents required for a corporate sale.

For legal advice on your business' sales or acquisitions, please contact Emma Cameron, in our Corporate Law team, on 01923 919 305.