Introduction

The case of Briggs of Burton PLC against Doosan Babcock Ltd ([2020] ScotCS CSOH_100) adjudicated by the Scottish Court of Session on December 15, 2020, addresses a pivotal issue in Scottish contract law: the rectification of sub-lease agreements against the backdrop of non-binding heads of terms. This case delves into the applicability and limitations of statutory rectification under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, particularly section 8(1)(a).

The primary parties involved were Briggs of Burton PLC ("Pursuer") seeking rectification, and Doosan Babcock Ltd ("Defender") opposing the request. The crux of the dispute revolved around whether the formal sub-lease, which deviated from the initially agreed non-binding heads of terms, could be rectified to reflect the original intentions of the parties.

Summary of the Judgment

The court examined whether the sub-lease document was intended to accurately represent the common intention of the parties as outlined in the non-binding heads of terms. The key issues centered on two matters: the timing of the break clause and the responsibility for crane maintenance.

The court held that rectification was not warranted because the formal sub-lease reflected a different intention, largely influenced by changes communicated by the Defender's solicitors during the drafting process. The lack of explicit communication regarding these changes meant there was no continuing common intention to adhere strictly to the original heads of terms. Consequently, the court denied the Pursuer's request for rectification, upholding the formal sub-lease as valid.

This decision underscores the importance of clear communication and mutual understanding during the drafting of binding agreements, especially when preliminary terms are non-binding.

Analysis

Precedents Cited

The judgment extensively referenced Scottish and English case law to elucidate the principles governing rectification requests. Key precedents included:

• Angus v Bryden (1992): Highlighted subjective approaches in non-binding agreements.
• Rehman v Ahmed (1993): Reinforced objective assessment of common intention.
• Patersons of Greenoakhill v Biffa Waste Services Ltd (2013): Emphasized objective evaluation regardless of binding nature.
• Britannia Invest A/S v Scottish Ministers (2018): Addressed rectification in formal leases following non-binding terms.
• FSHC Group Holdings Ltd v GLAS Trust Corporation Ltd (2020): Reviewed differing approaches to rectification in English law, distinguishing between objective and subjective tests.

These cases collectively informed the court's stance that rectification in Scotland is primarily a statutory remedy and should adhere to an objective assessment of the parties' intentions, especially when addressing non-binding preliminary agreements.

Legal Reasoning

The court's legal reasoning centered on interpreting section 8(1)(a) of the 1985 Act, which allows for rectification when a document fails to express the parties' common intention accurately. The pivotal question was whether the non-binding heads of terms intended to influence the formal sub-lease.

The court adopted an objective approach, assessing the common intention at the time of executing the formal document rather than merely referencing the initial non-binding terms. It was determined that the Defender's solicitors had unilaterally altered key terms without effectively communicating these changes to the Pursuer's side, thereby disrupting any continued common intention based on the original heads of terms.

Furthermore, the court distinguished between rectification based on an enforceable contract versus a non-binding agreement, concluding that in the absence of a binding antecedent, rectification should not be favored when changes have not been adequately communicated or agreed upon.

Impact

This judgment reinforces the sanctity of formal agreements in Scottish law, especially when initial terms are expressly non-binding. It serves as a cautionary tale for parties to ensure that any deviations from preliminary discussions are transparently communicated and mutually agreed upon during the drafting of binding documents.

Additionally, it clarifies that statutory rectification is not a panacea for discrepancies arising from non-binding agreements unless there is clear evidence of a shared and continuing intention. This decision may influence future cases by setting a precedent that emphasizes objective assessment and the necessity of clear communication.

Complex Concepts Simplified

Rectification

Rectification is a legal remedy that allows a written contract to be amended to reflect what the parties actually intended. This is typically invoked when there is a discrepancy between the written document and the original agreement.

Heads of Terms

Heads of terms are preliminary, non-binding agreements outlining the main points of a future, more detailed contract. They serve as a roadmap for both parties before the formal contract is drafted.

Missives

In Scottish law, missives are formal letters exchanged between parties leading to the formation of a legally binding contract. They play a crucial role in property transactions and leases.

Common Intention

Common intention refers to the mutual understanding and agreement of the parties involved in a contract regarding the terms and obligations. It is central to determining whether a written document accurately reflects that understanding.

Objective Approach

An objective approach assesses the intentions of parties based on outward expressions and actions, rather than their internal, uncommunicated intentions. It focuses on how a reasonable person would interpret the situation.

Conclusion

The judgment in Briggs of Burton PLC v Doosan Babcock Ltd establishes a clear boundary in Scottish contract law regarding the rectification of sub-lease agreements. It underscores that non-binding preliminary agreements cannot unilaterally dictate the terms of formal, binding contracts unless there is an unequivocal, mutual intention to do so.

Parties entering into contractual agreements must ensure meticulous drafting and communication, especially when initial terms are non-binding. Any modifications introduced during the drafting phase must be transparently conveyed and agreed upon to preserve the integrity of the final contract.

This decision also enhances legal certainty by affirming that statutory rectification is not readily available to adjust formal agreements solely based on earlier non-binding terms. Instead, rectification requires a demonstrable, common intention at the time of executing the formal document, thereby promoting fairness and clarity in contractual relationships.