CHAPTER 6 –

REFORMATION OF
CONTRACTS
PREPARED BY: JAYSON M. AGONOY, CPA
REFORMATION
• The process of rewriting the instrument in order to express the true agreement of the
parties when what is embodied is different from their true intention.
• In reformation, there is already a meeting of the minds between the parties to a
contract but their true intention is not expressed in the document by reason of fraud,
mistake, accident, or inequitable conduct.
• If mistake, fraud, accident or inequitable conduct prevented the meeting of the minds
between the parties, the proper remedy is not reformation but annulment of the
contract
• This remedy is not allowed only before the contract has been enforced by the party
who has the right to ask for reformation.
KINDS OF DEFECTIVE CONTRACT

• Rescissible
• Voidable
• Unenforceable
• Void
RESCISSIBLE CONTRACT
• There are no defects in the essential elements of a contract but damage or injuries
are suffered by another person.
• Rescission is the cancellation of the contract and return of the parties to their
original position as if no contract has been entered into.
• It is a subsidiary remedy which will only be allowed if the injured party has not other
means to recover the damage done.
• It will not be allowed if the party seeking rescission can no longer return what he
must restore to the other or when the property is already in a legal possession of a
third person who acted in good faith
• Rescission shall only be to the extent necessary to cover the damage caused and the
action for rescission must be filed within 4 years.
VOIDABLE CONTRACTS
• Is one wherein the consent of one of the parties is defective because of
incapacity, mistake, violence, intimidation or fraud and undue
influence.
• A voidable contract can be ratified and once it is ratified it is cleansed of
all of its defects and the right of action to annul it is extinguished.
• Ratification is an act or means by virtue of which efficacy is given to a
contract which suffers from a vice of curable nullity.
• Only the injured party can ratify the contract or ask for its annulment
within 4 years.
UNENFORCEABLE CONTRACT

• Is one which has been entered into without authority or in excess

of authority
• Is one which violates the statutes of fraud.
• Is one where both parties are incapable of giving consent.
VOID OR INEXISTENT CONTRACT

• Is one where the object or cause defective.

• Where one, some of all of the essential elements of a contract is
missing
• This kind of contract cannot be ratified and it cannot be assailed by
a third person whose interest are not directly affected.
THANK YOU!!!

• SEE YOU NEXT MEETING….