Correcting an obvious mistake in drafting as a matter of construction

Shenzhen H&T Intelligent Control Co. Ltd v Smarter Applications Ltd [2026] EWHC 805 (Comm)

The question

What are the relevant factors and principles that the courts will take into account when correcting a mistake in a contract as a matter of construction.

The key takeaway

Corrective construction is an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. It is adopted where there is an obvious error on the face of the contract or document and it is clear, either from the document itself or from admissible extraneous evidence, what correction ought to be made.

The background

In 2020, Smarter Applications, as customer, entered into a manufacturing agreement with H&T as manufacturer for the delivery of second-generation fridge cameras.

Following a dispute about H&T’s failure to deliver the fridge cameras, Smarter Applications sought c £100m in damages for breach of contract as well as specific performance of certain IP rights in the contract. In response, H&T sought declarations on the true construction of the manufacturing agreement’s limitation of liability clause and applied for the damages claim to be dismissed. Its position was that the damages sought were limited by the agreement’s limitation clause (on its true construction) to c£31k, and that it had already paid that sum to Smarter Applications.

The mistake H&T was looking for the court to correct was that the limitation clause, as originally drafted, limited the customer’s total aggregate liability rather than the manufacturer’s total aggregate liability to the amount paid by the customer in the relevant calendar year:

LIABILITY

…, Customer’s total aggregate Liability arising directly or indirectly out of, under or in connection with this agreement for any and all claims of whatsoever nature and howsoever formulated in any Contract Year shall not exceed an amount equal to the amounts paid by Customer to Manufacturer under this agreement in that Contract Year.

The parties referred the court to a number of recent authorities on the general principles applicable to the construction of commercial documents. The court was then invited by H&T to correct the mistake in the limitation clause by the process of construction outlined in East v Pantiles (Plant Hire) Ltd (1981) 263 EG 61, where “Two conditions must be satisfied: first, there must be a clear mistake on the face of the instrument; secondly, it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied, then the correction is made as a matter of construction.”

This is referred to as the Chartbrook principle, in which case the court held that “there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.”

The decision

The court found that there was a clear mistake in the limitation clause of the manufacturing agreement and that it was clear what correction ought to be made to cure the mistake, namely that the clause should refer to “manufacturer” rather than “customer”. Accordingly, Smarter Application’s damages claim was dismissed for the total payment of c. £31k.

The court took account of a number of factors in reaching its decision including:

• The overall quality of the drafting was poor. In various other places in the manufacturing agreement, “customer” had been used when the parties clearly intended to refer to “manufacturer” and vice versa.
• Relevant authorities showing that parties have drafted so as to limit one party’s liability by reference to payments made by the other party to the contract. Smarter Applications, on the other hand, was unable to identify any cases where limitation clauses limited the liability of one party by reference to payments that party made under the relevant contract.
• The interpretation of the drafted wording would have been “absurd” because it would enable Smarter Applications to avoid any liability by failing to pay the sums it was due to pay under the contract.
• The manufacturing agreement provided limits on Smarter Application’s liability by a number of other clauses, and Smarter Applications could not identify any unlimited liability requiring the limitation clause.
• The effect of correcting the mistake in the limitation clause would not limit H&T’s liability to Smarter Applications for Smarter Application’s liability to its customers and others where that liability had been caused by H&T’s breach of contract because the manufacturing agreement provided an express indemnity from H&T to Smarter Applications in respect of this liability.
• It was not difficult to see how the error had arisen.

However, the court refused to rely on H&T’s argument that the parties “must have intended” there be some limit to H&T’s liability. It would not attempt to “rewrite the parties’ bargain on the grounds that it is commercially unattractive”.

Why is this important?

The Chartbrook principle shows that where there has been a clear drafting error, the courts will allow correction by construction where both the mistake and its correction are obvious on the face of the document. In its process of construction, the court is not confined to reading the document without regard to its background or context. It will consider a number of relevant factors including, as in this case, the contractual risk allocation, commercial coherence, indemnity structure and existing liability limitations elsewhere in the contract.

Any practical tips?

Ensure contracts are properly reviewed for drafting errors prior to execution. Parties should take care to ensure that their objectives, including allocation of risk, are correctly put into effect in the contract and that the limitation of liability will adequately compensate them for loss.

Where an error that may prove to be problematic is identified, since rectification is an entirely separate (equitable) remedy consider that it may, in certain scenarios, be more straightforward to seek to correct a mistake by construction, ie seeking a declaration of the court as to the meaning of the relevant clause, rather than by applying for rectification of the document.

Autumn 2026