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ARTICLE · 28 NOVEMBER 2024

An Almost Plane-Ful Mistake - Rectification vs Interpretation

A&O Shearman
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The English High Court ruled that a contract requiring overdue payments was rectified to reinstate obligations due to a clear common mistake in a multilateral agreement, providing guidance on rectification criteria.

United KingdomCorporate/Commercial Law
Arthur Tan
Arthur Tan
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In dealing with a series of intertwined contracts, the English High Court found that the correct interpretation of a contract meant that an airline had had its obligations to make overdue payments terminated but then rectified the same contract so that the airline's payment obligations were reinstated. In doing so, it provided helpful guidance on the requirements for rectification of multilateral contracts.

The transactions

SATA is a regional air carrier in the Azores. It leased an Airbus A300 for 5 years. The plane was sold to Hi Fly and the lease novated.

SATA got into financial difficulties and fell behind on its lease payments. Its financial situation worsened due to the COVID-19 pandemic. AELF entered into the picture and was interested in buying the plane from Hi Fly and having the SATA lease novated to it.

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