When a written agreement does not reflect or express the true intentions of the parties, the contract may be reformed or changed. This is the right to reformation of instruments. This remedy is available so that the instrument may be accordingly revised to better manifest the agreement of the parties.
A party has the right to ask for the reformation of the instrument if it does not properly express the intent of the parties. This right is granted only to the extent that the true intentions may properly be reflected. Otherwise stated, it is only the provisions which are unclear and ambiguous which may be revised. If the parties agree to change clear and unambiguous provisions, they may be entering into a supplemental contract, a new contract, or a novation of the original contract.
Example 1: In a contract of sale of a condominium unit, the buyer obligated itself to pay the purchase price through a 24 monthly installments. On the other hand, the Realty Company selling the unit obligated itself to transfer and deliver ownership to the buyer upon full and complete payment of the purchase price. The transaction entered into by the parties is a contract to sell; however, they executed a contract of sale. As the intention of the parties is to enter into a contract to sell, their contract of sale may be modified accordingly to the extent that the will of the parties be shown.
Example 2: Using the same example above. If the parties later on agree to change the contract of sale such that the buyer will pay in full the purchase price and the Realty Company will transfer and deliver ownership of the condominium unit, they have entered into a novation of the original contract.
The grounds for invoking the right of reformation is due to the written instrument being unable to reflect the agreement or intentions of the parties by reason of: (a) mistake; (b) fraud; (c) inequitable conduct; or (d) accident. If the latter circumstances had actually prevented a meeting of the minds, the proper remedy is for the annulment of the contract. This is so as the consent of the parties may be defective or vitiated.
The remedy of reformation of the instrument is available even if there was a mutual mistake resulting in the failure of the instrument to reflect or disclose their agreement. Either party (or his successors-in-interest) may ask for the reformation of instrument. The party who was mistaken has the right to ask for reformation of the instrument, even if the other party knew or believed that there was a mistake and even concealed that fact to the other. If the mistake was due to one party, it is only the injured party (or his successors-in-interest) who can ask for reformation.
The remedy is not available to a party who acted fraudulently or inequitably in such a way that the instrument does not show their true intention. The erring party should not be rewarded for his unscrupulous behavior. If such conduct is permitted, it will wreak havoc on contracts as a party with evil intentions may simply ask for reformation if his plans do not work out.
Upon a complaint, the courts may order that the instrument be reformed if the instrument is defective due to ignorance, lack of skill, negligence or bad faith on the clerk, typist, or person who drafted the agreement. In so doing, the courts will factor in the principle of adhesion – wherein a contract will be construed against the party who prepared it.
A party who has already brought an action to enforce the contract cannot subsequently ask for its reformation. By filing a case, the said party declares that the contract reflects the intentions of the parties resulting in the waiver of the defects therein.
Notwithstanding the foregoing and what has been discussed, there cannot be any reformation in the following cases: (a) simple donations inter vivos wherein no condition is imposed; (b) wills; and (c) when the real agreement is void.