Reformation of a Contract

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 What Is Reformation of a Contract?

Reformation of contract may be permitted in some cases to remedy a breach of contract or other forms of contract disagreements. To “reform” a contract means re-writing a portion of it to match the parties’ intentions better. Contract reformation is typically obtainable in two scenarios:

  1. Cases concerning mistaken terms in the agreement
  2. Cases concerning misrepresentation (either deliberate or unplanned)

Reformation in contract law is a legal remedy. The court re-writes the contract to reflect both parties’ real purposes. Contract reformation is an alternative to equitable remedies, such as financial damages. In a breach of contract claim, the injured party frequently must pick between an equitable and legal remedy. The latter is often a sound choice if one or both parties misinterpreted one or more of the agreement terms or made an error in the agreement.

How Does Contract Reformation Happen?

If fraud has happened, reformation can be used to redraft the agreement if an equitable remedy is called for. For instance, imagine a real estate agreement erroneously conveys the property’s value to deceive the customer. In that circumstance, the buyer can sue for breach of contract. If both parties approve, the court can modify the agreement to reflect the property’s actual worth.

If both parties are not amenable to a new agreement, reformation will not function as a cure. Rather, the buyer would probably receive a settlement, or the seller would be subject to fines. The court may not impose a contract on a party that does not agree with its terms.

Reformation is used only when the court has obvious, persuading proof of intent on behalf of both parties. This process may only clarify, not alter, the contract terms. If modifications are made, each party must initial the modification. The mistake can be corrected, or an altogether unique rendition of the agreement can be prepared. Courts often encourage parties to compromise on reformation and execute the new agreement if another conflict occurs.

What are the Requirements to Reform a Contract?

All factors must be fulfilled for a contract to be eligible for reformation:

  • A proper agreement exists.
  • A good reason exists to re-write the agreement (generally either mistake or misrepresentation on behalf of one or both parties). Reformation will be given for both intentional and unexpected misrepresentation and bilateral mistakes.
    • However, imagine only one party made an error. In that circumstance, the contract can be reformed only if the other party is oblivious of the other.
  • No defenses are available.

A contract cannot be reformed if doing so will cause prospective damage to either party or lead to an unfair or one-sided agreement.

What are the Other Types of Contract Remedies?

If reformation is unreachable, the court could altogether nullify the contract. Nullification may be the cure if one party makes a blunder that the other party is aware of. Occasionally, the injured party can opt for economic damages depending on the particulars of the claim and the types of breach. Regardless, if an entity takes this path, they cannot later ask for reformation or rescission.

When Does a Disagreement Exist?

Parties frequently clash about whether a mistake has transpired if the error aids one party and hurts the other. The latter may bring a reformation lawsuit combined with a breach of contract suit. A lawsuit should be filed as soon as a mistake is discovered to avoid defenses of unreasonable delay for reasons of prejudice.

The party suing for reformation accepts the burden of proof, which frequently requires the true intent of both parties in writing or other obvious and compelling evidence. Nevertheless, the party may prevail on the breach of contract claim alone if the agreement is found to be vague by the court.

How Do I Avoid Contract Errors?

Enforceable contracts must be error-free. When forming a new agreement from an old template, inspect the phrasing carefully. Have a lawyer acquainted with your industry write the agreement or study and modify your initial draft. Be conscious of grammatical mistakes that can change the purpose of an agreement.

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What Components of a Contract May Be Reformed?

Generally, only the part of the contract in dispute will be reformed. It doesn’t make sense to re-write the whole arrangement. If re-writing the entire agreement was required, the parties may rescind or withdraw the agreement as a whole.

Instead, reformation will concentrate on the basis of the conflict, such as a term that caused a mistake of fact or the word that involved misrepresentation. For example, imagine a breach of contract occurred because one party meant that the term “tubes” referred to Grade B textiles. In distinction, it referred to Grade A textiles. Here, the courts might authorize the parties to rewrite the agreement in a way that describes the term “tubes” more clearly.

In some cases, other sections of the contract may need to be re-written, such as clauses affected by the specific mistake.

Are There Defenses to Reformation?

A party may be prevented from obtaining reformation if the other party has an honest defense. These may include:

  • Laches the plaintiff can’t obtain reformation if they have deliberately delayed in filing a claim to the detriment of the other party.
  • Unclean hands the plaintiff can’t get reformation if they are guilty of the same type of transgression or behavior as the defendant.

Therefore, filing for a remedy such as reformation requires meticulous planning by the party seeking the remedy.

When Is Contract Reformation Unavailable?

Contract reformation won’t be granted if it will cause financial damage to any of the parties in the future. For example, the court won’t allow the parties to rewrite an agreement in a way that restricts the legal privileges of either party. Likewise, courts will not allow reformation if it will lead to an agreement that is unfair or one-sided.

What Are Some Other Kinds of Contract Remedies?

Rescission may be granted where there is a unilateral mistake, but the non-mistaken party knows about the mistake.

Parties can sometimes elect to receive damages. However, this depends on various elements, including the type of infraction and the general facts of the case. Usually, if a party elects to sue for damages, they can’t seek rescission later.

Do I Need a Lawyer for Help with Contract Reformation Issues?

The reformation of a contract can often involve some highly complex legal terms and theories. It’s in your best interests to hire a contract lawyer if you need help filing a claim involving a contract dispute. Your lawyer can review the contract in light of state and local laws to determine what options you might have. Also, your attorney can be on hand to provide representation when you need to attend court sessions.

Contract remedies can be complicated and difficult to comprehend, even for those acquainted with legal contracts. Nevertheless, this is a strong strategy through which courts can create a new contract. This can significantly affect the terms of the agreement, so it’s vital to seek the input of an experienced contract lawyer. In addition, having an attorney write the initial agreement can stop the need for later reformation.

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