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Court’s Decision on Obvious Typo Errors in Contracts

INTRODUCTION

Typographical error in a legal document is also known as a scrivener’s error[1]. The popular term that people generally adopt though is ‘typo error’. Essentially, it is an error of miswriting or misspelling a word whilst finalising a document.

The problem is, the typo error can be so miniscule but can change the meaning of a term or condition of a contract.

Further, one party of a contract might take unfair advantage on the typographical error, refuse to acknowledge that it is in fact an error and use it to his advantage, even if the error is obvious.

Typo errors can come in different forms, including as a misnomer, a wrong cross-referencing, or just simply a misspelling.

1) Malaysia

i) Ng Siew Wah & Ors v. MAA Holdings Sdn Bhd & Anor[2]

Facts:
In relation to a written contract of sale and purchase of shares of a company (“Contract”), Clause 6 of the Contract relating to the entitlement to specific performance referred to Clause 2 of the Contract, which dealt with the application for approval of the Foreign Investment Committee.

Judgment:
The learned trial judge held that there was a typographical error and that the reference relevant to the specific performance entitlement of Clause 6 should be Clause 3 instead, which dealt with the payment of the balance of the purchase price. The Supreme Court ruled that “It is an established principle that rectification is not necessary if there is obvious mistake or misnomer in a document. No court will allow people to take advantage of a misnomer or typing error when everyone knows what was intended.

ii) Syarikat Pembenaan Fajar Baru (Rembau) Sdn Bhd v Carrier (M) Sdn Bhd[3]

Facts:
The plaintiff entered into an agreement to purchase 12 chillers from the defendant. The first quotation issued by the defendant to the plaintiff (“First Quotation”) contained the following two offers i.e.

1. base offer: price of the chillers after the payment of import duty and sales taxes (“Base Offer”); and 2. alternative offer: the duty free price of 11 chillers plus one chiller at duty paid price (“Alternative Offer”).

with delivery ex-Syracuse, USA, i.e. the plaintiff had to take delivery of the chiller from Syracuse, USA.

The plaintiff requested for a second quotation (“Second Quotation”) to be based on the Alternative Offer but to be ex-Singapore instead of ex-Syracuse, which the defendant duly prepared.

A dispute arose as to which party was liable to pay the import duty and sales tax for the 11 chillers.

The plaintiff relied on the Second Quotation which contained the words ‘duty paid for all equipment’ to support its case that the price of the chillers included the import duty and sales tax.

The defendant on the other hand pleaded that the 11 chillers and related equipment were sold on a duty free basis as they were ex-Singapore and only one unit at duty paid. The defendant also pleaded that the phrase ‘duty paid for all equipment’ in the Second Quotation were typographical errors and in the final analysis the plaintiff was to bear the import duty.

Further, the typographical errors were made known to the plaintiff almost immediately upon being spotted, by way of a letter.

Judgment:
The judge held, in favour of the defendant, that:

1. Since the Second Quotation was based on the Alternative Offer, which hinged on a duty free basis (wherein duty would not need to be paid on the item), the second quotation must also necessarily be implied to be on the same basis;

2. The Second Quotation must be considered as a whole in the context of objective circumstances surrounding its execution and ought not to be construed by merely placing heavy reliance on the words ‘duty paid’ alone.

3. It was plain that the words ‘duty paid’ that appeared in the Second Quotation were the result of typographical errors and as such the plaintiff had taken unfair advantage on those errors to disclaim liability on the import duty by merely using the words ‘duty paid’ and not taking into consideration the whole context.

2) United Kingdom

The Court of Appeal in the case of Davies v Elsby Brothers Ltd[4], discussed on test of construction of a document. The court stated as follows:

“In English law as a general principle the question is not what the writer of the document intended or meant but what a reasonable man reading the document would understand it to mean; and that, I think, is the test which ought to be applied as a general rule in cases of misnomer.”

i) Nittan (UK) v Solent Steel Fabrications[5]

Facts:
Sargrove Electronic Controls Ltd, a dormant company, was named in an endorsement to a product liability insurance policy.

Solent Steel had taken over the assets but not the liabilities of Sargrove Electronic Controls Ltd which then became dormant. Solent Steel continued to manufacture electronic equipment under the business name of Sargrove Automation.

When the insurers issued an endorsement to the product liability policy they referred to Sargrove Electronic Controls Ltd when they should have said Sargrove Automation, the trading name of a division of Solent Steel.

Judgment :
The Court of Appeal in this case in his opinion, a misnomer is not necessarily a mistake which requires an equitable remedy of rectification. It may be a mere clerical error. For example, would be the use in a conveyance of the expression ‘the vendor’ when clearly ‘the purchaser’ was intended. It is not necessary to rectify the conveyance to enable it to be read and take effect as the parties plainly intended.’

The Court of Appeal unanimously held that the reference to Sargrove Electronic Controls Ltd was a misnomer and that it must have been plain to the parties and to everybody that Sargrove Electronic Controls Ltd was used as a name to describe Sargrove Automation, a division of Solent Steel.

3) United States

i) S.T.S. Transport Service, Inc. v. Volvo White Truck Corp.[6]

Facts :
In this case, the STS expressed an interest to purchase eight new tractor trucks (“Trucks”) from White Motor Company (“White Motor”), a truck manufacturer whose assets were purchased by Volvo White. There were errors on the calculation of the payment of trucks and heavy equipment claimed by Volvo White in the letter.

Judgment:
The court ruled that in this case it will be more useful to allow the contracts to be changed or rescinded rather than to enforce the typographical errors.

ii) Mendota Insurance Company v Olivia Ware[78]

Facts:
The parties disputed on the amount of an insurance policy’s limit of liability for bodily injury coverage.

The actual coverage of insurance policy subscribed by Ware was limited to a certain amount. However, due to an error in the contract, the amount of coverage became unlimited. Ware argued that such error created ambiguity and hence shall be interpreted in her favour ie. imposing no monetary limit on the liability coverage in the insurance.

Judgment:
The court in this case rectified the error in the insurance contract and rejected Ware’s argument. The court looked at the insurance contract as a whole and said that a reasonable reader would recognise the error is genuinely unintended as the definition of the contract has clearly defined on the coverages of the insurance. Further, the court in this case clarified that the policy could not reasonably be construed to cover unlimited liability coverage.

4) Singapore

Singapore has largely followed common law rules9 on the typographical errors issue. It must be noted that in Singapore, however, rectification is needed10 and it has become increasingly important for the parties to rectify the mistake in contracts.

i) Ng Swee Hua v Auston International Group Limited[11]

Facts :
Auston International Group Ltd (“Auston”) is the holding company of Auston Institute of Management & Technology Pte Ltd (“AIMT”).

In 2005, Auston faced financial difficulties and needed funding. Auston entered into an Investment Agreement (“Agreement”) with Mr. Ng Swee Hua who provided a sum of $200,000.

The dispute arose between the parties and they brought the matters to the court. The court also brought to attention the errors in Clause 3.2.5 of the Agreement. In the Agreement, the word “Company” is identified as AIMT.

Judgement :
The court in this case rectified the error and ruled that the word “Company” shall refer to Auston instead of AIMT in the Agreement and that the typographical error in this case is clear.

ii) Edwards Jason Glenn v Australia and New Zealand Banking Group Ltd.[12]

Facts :
In this case, Edwards (“Plaintiff”) as the Borrower entered into Loan Agreement (“Loan”) with the Australia and New Zealand Banking Group (“Defendant”). One of the issues arose where there were typographical errors in Clause 13(a) and (b) in Clause 16(c) of the Loan relating to the conditions attached to the Borrower. The Defendant in this case did not deny as to the errors in the Loan.

Judgment :
The court in this case rectified the typographical errors under Clause 13 (a) and (b) and Clause 16 (c) since it will be nonsensical otherwise. In determining whether rectification is needed or not, the court referred to the holistic or ‘whole contract’ approach. In this approach, the court interpreted Clauses 13 (a), (b) and Clause 16 (c) in a whole context of the Loan and not in isolation.

CONCLUSION

Based on the cases, there is a clear position in Malaysia, United Kingdom, United States and Singapore in relation to obvious typographical errors. The court will never allow a contractual party to take unfair advantage of a misnomer or typing error when it is clear what is intended.

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1 Correcting Scrivener’s Error in Insurance Contracts by Scott G Johnson (Source:https://www.robinskaplan.com/~/media/pdfs/its%20a%20mistake%20correcting%20scriveners%20errors%20in%20insurance%20contracts.pdf?la=en)
2 [1985] 2 MLJ 332
3 [2011] 3 MLJ 83
4 [1960] 3 All ER 672, [1961] 1 WLR 170
5 [1981] 1 Lloyd’s Rep 633
6 766 F.2d 1089 (7th Cir. 1985)
7 348 S.W.3d 68.
8 Supra Note 1
9 Clarifying rectification in Singapore by Goh Yihan (2015) 27 SAcLJ. (Source : https://journalsonline.academypublishing.org.sg/Journals/Singapore-Academy-of-Law-Journal/e-Archive/ctl/eFirstSALPDFJournalView/mid/495/ArticleId/419/Citation/JournalsOnlinePDF )
10 Supra Note 8
11 [2008] SGHC 241
12 [2012] SGHV 61

 

Prepared by:

Rosinah Mohd Salleh (Partner) general@azmilaw.com

Ella Mohd Ali (Associate) ella@azmilaw.com