Pre contract negotiations - inadmissable in court

The House of Lord recently confirmed that if a dispute breaks out as to the correct interpretation of a contract the parties cannot bring into evidence pre contractual discussions. This policy is to prevent, or at least reduce, uncertainty of outcome in contractual disputes and the higher cost of litigation that would accompany an examination of negotiations that preceded the contract.

There are two exceptions to this rule of inadmissibility. One relies on the principle of estoppel where parties have entered the contract on the basis of a common assumption, eg that particular words had a particular meaning: one party can be stopped from denying that meaning if the other can show they both, or all, shared the assumption.

The other is rectification where the party seeking to "correct" the contract must demonstrate four things broadly along the lines of showing that there was a common intention which was not included in the contract because of a mistake.

The exceptions are narrow and technical. The courts are reluctant to "reopen" a contract. So if the matter or particular interpretation is important you must make sure it is reflected in the contract you sign.

Case: Chartbrook v Persimmon Homes

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