CONTRACTS

CHAPTER 2: REFORMATION OF CONTRACT

Reformation
It is a remedy when the agreement of the parties does not provide for their
true intention.

Requisites:
a) There is meeting of the minds
-if there is no meeting of the minds, the remedy is
ANNULMENT
b) Failure to state the true intention or agreement
c) Such failure is due to mistake, fraud, accident or inequitable
conduct (grounds)
d) There is a clear and convincing evidence to prove such ground

Illustration:

X sold a parcel of land to Y which includes all improvements therein. The Deed of
Sale did not include the improvements as part of the sale. What is the remedy of
the parties?
The remedy is reformation to establish the true intent of the parties

Grounds:

1. Mutual mistake of the parties (Art. 1361)

- Pertains to mistake of fact which must be mutual or common to both
parties

2. Unilateral mistake of one party (Art. 1362)

- There is fraud committed by one of the parties
- The remedy of reformation is available to the party who acted in
GOOD FAITH

3. Concealment by Mistake by one party (Art. 1363)

- Remedy of reformation is available to party who acted in GOOD FAITH

4. Ignorance, lack of skills or bad faith on the part of the person who drafted
the instrument (Art. 1364)
- Clerical error
- Neither of the parties are in bad faith

5. Mortgage or pledge stated as sales

When reformation is not allowed?

1. Simple donation intervivos where no condition is imposed

- The done cannot demand reformation, only the donor
- If it is conditional or onerous, the done may ask for reformation

2. Wills
- Upon death of the testator, the right to reform is lost

3. When the real agreement is void

 - If the real intention is void, there is nothing to be reformed

4. One party has brought an action to enforce the instrument

- Enforcement is not compatible with reformation

Exercise:

X executed a Deed of Sale in favor of Y covering X’s parcel of land

designated as Lot 12345. The lot in the deed of sale, however, was mistakenly
described as Lot 12435. X did not object when Y took possession of Lot 12435.
Is reformation appropriate?