Deeds of Variation v Rectification: Key Differences in Amending Legal Documents

Introduction

It may be necessary to correct or alter legal documents – such as wills, trust or contracts – when information becomes outdated or errors are discovered after the document has been executed.

Two common legal tools used for this purpose to avoid the need to create a new document are the Deed of Variation and the Deed of Rectification.

While both Deeds can be used to address issues that have arisen after a document has been executed, they each serve a different purpose, use different procedures and each have different and separate legal implications. 

Understanding the difference between these two Deeds is crucial to ensure amendments are lawfully and effectively made.

This article will explore what the Deeds are, when they are to be used and the key distinctions between the two.

Deed of Variation

A Deed of Variation is to be used when an executed document contains information that is now out of date or no longer relevant. In those circumstances, rather than preparing and executing a brand new document, a Deed of Variation can be used to modify the terms of the original documents.

This process relies on the general principles of contract law and requires mutual agreement from the parties involved. A Deed of Variation can be used to:

1. Change operative provisions of a legal document;
2. Update personal details such as names or addresses; or
3. Reflect changes in the parties’ rights or obligations, provided the original document allows for a variation to be made.

The ability to vary a document will depend on the variation clauses contained in the original document. For example, altering a trust deed may require you to obtain the consent of a trustee or appointor. In some instances, particularly where substantial changes are made to a trust, the variation may be considered a “resettlement” which may trigger tax and duty liabilities. This article will not explore this issue, but this risk should be considered and legal advice should be obtained.

Deed of Rectification

In contrast, a Deed of Rectification is used to correct an error in a legal document and that error existed at the time the document was executed. This remedy is used not to change the parties’ intentions but rather to ensure the document accurately reflects what the parties originally intended to agree to.

The High Court clarified the principles of rectification in Simic v New South Wales Land and Housing Corporation [2016] HCA 47 citing the earlier case of Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336. In this case, the court held that the purpose of rectification is to amend a written and executed instrument due to a common mistake that fails to express the parties’ true intentions and agreement.

A Deed of Rectification may be necessary where:

1. A party’s name was misspelled;
2. The wrong date was inserted into the document; or
3. Incorrect details were included, despite the correct information being available at the time.

In order for a Deed of Rectification to be used, there are three key elements that must be shown:

1. Common intention: The parties shared a common intention when forming the agreement and this intention persisted until execution.
2. Mistake: A mistake was made that caused the document to not reflect that common intention.
3. Correction: Rectifying this mistake would align the document with the true and original intentions of the party.

Evidence of common intention will often be found in correspondence or documents from the time of the original document.

Conclusion

Both Deeds of Variation and Deeds of Rectification play important roles in addressing issues that may arise after legal documents have been executed. Despite their shared role, these Deeds are fundamentally different and must be used in the correct circumstances. 

A Deed of Variation is a consensual arrangement entered into in accordance with the variation clauses of the original document to alter its terms. 

In comparison, Deeds of Rectification are an equitable remedy used to correct documents that due to an error at the time of signing, do not properly reflect the intentions of the party.

Understanding the difference between these two legal tools is essential with the wrong tool resulting in delays, additional costs and unintended legal consequences.

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