Reformation of instruments – Contracts Law

1. Concept

When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed. (Article 1359, Civil Code)

2. Grounds

a. Mistake

1) Mutual mistake

When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed. (Article 1361, Ibid.)

Reformation may be ordered at the instance of either party or his successors in interest, if the mistake was mutual; otherwise, upon petition of the injured party, or his heirs and assigns. (Article 1368, Ibid.)

2) Mistake by one, fraud or inequitable conduct by the other

If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument. (Article 1362, Ibid.)

3) Mistake by one, knowledge or belief by the other

When one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former, the instrument may be reformed. (Article 1363, Ibid.)

b. Fraud

c. Inequitable conduct

d. Accident

If two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase, reformation of the instrument is proper. (Article 1365, Ibid.)

3. No meeting of the minds

If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties, the proper remedy is not reformation of the instrument but annulment of the contract.(Paragraph 2, Article 1359, Ibid.)

4. When no reformation of instruments

There shall be no reformation in the following cases:

1) Simple donations inter vivos wherein no condition is imposed;

2) Wills;

3) When the real agreement is void. (Article 1366, Ibid.)

5. Court relief

a. Enforcement bars reformation

When one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for its reformation. (Article 1367, Ibid.)

b. Court order

When through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not express the true intention of the parties, the courts may order that the instrument be reformed. (Article 1364, Ibid.)

References

⦁ Book IV, Republic Act No. 386, Civil Code