Good practice and honesty do not allow a party to vary a term in an agreement that two parties have reached in order to deceive the other party and transfer an obligation to them or to add an obligation, unless there was a common mistake.

This can happen before the signing and after the parties have reached an agreement. A replacement or addition of a term of the agreement may be made, without the knowledge of the other party, despite the assurance that the text of the agreement had been finalised and there has been no change.

This action is reprehensible, since it seeks to deceive a party. It is fraudulent behaviour that cannot be accepted, especially when, by changing one or two words, a financial obligation is transferred or added.

The case is different when there is a common mistake, in which case both parties acknowledge it and jointly correct it with a supplementary agreement. Obviously, the signature binds the parties, but the trust in and security of the transactions also creates the obligation to correct the mistake.

Court Decision

The Larnaca District Court issued a decision on May regarding a dispute between contracting parties over a sales agreement for the purchase of a house. The vendor was requested to ensure the issuance of a letter of guarantee for his compliance with his contractual obligations.

Specifically, the buyer’s claim in the lawsuit was that he was entitled to a refund of the amount of the letter of guarantee costs, except for those of the first two years that were borne by him, which he was forced to pay unjustifiably to the vendor in order not to lose his rights, as well as an order to rectify the sale agreement, so that it reflected the true intention and agreement of the parties in relation to the costs of the guarantee for the remaining period of eight years, which would be borne exclusively by the vendor.

The disputed term of the agreement that was signed and which the vendor defended as agreed upon from the beginning, stated that “the buyer will pay the cost of the letter of guarantee for the first two years…, and the buyer will pay the cost of the guarantee for the remaining eight years”.

However, the buyer’s position was that the term in question, properly drafted, should have stated that “the buyer will pay the cost of the letter of guarantee for the first two years…, and the vendorwill pay the cost of the guarantee for the remaining eight years”.

Court’s legal analysis

The court referred to the settled jurisprudence that a signature is binding and that there is very little scope for a person to avoid the liability that their signature prima facie creates, a situation which conflicts with the reliance on written agreements and transactions and therefore with the necessary trust and security in transactions. The general rule is that extrinsic evidence is not admissible to contradict, change, remove or add to the terms of a written agreement, except where fraud is involved.

The court held, on the basis of case law, that it had the power to correct the contract as a result of a common mistake or fraudulent conduct.

It found that the text of the agreement intended for signature was given to an employee of the vendor to make corrections unrelated to the term in question. While the text of the agreement was in the exclusive possession of the vendor, the specific term in question was changed without the knowledge and consent of the buyer, without the vendor informing the buyer that this specific change had been made to the wording of the term in question before signing.

The court concluded that the costs of the guarantee that the vendor demanded from the buyer were not justified on the basis of the actual intention and agreement of the parties and that the buyer had no such contractual obligation and was forced to pay the amount in order not to lose his rights.

Accordingly, it issued a judgment against the vendor for the amount of the costs of the guarantee and an order to rectify the agreement.