This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
While the relief generally sought in such cases is to have the contract held void, such fraud may be treated as at least equivalent to mistake and the contract may be reformed, so as to express the contract into which the defrauded party was induced to believe that he was entering.1 Where by fraudulent misrepresentation of the contents of a lease,
Ry., 154 Ala. 573, 45 So. 906, where the release was signed while the releasor was intoxicated; Birmingham R. R. v. Hinton, 158 Ala. 470, 48 So. 546, where the release was signed when the releasor was under the influence of opiates, and Harrison v. Alabama Midland Ry., 144 Ala. 246, 40 So. 394, where the release was obtained by fraud, possible as to its contents. The latter case cites and purports to follow Stephenson v. Allison, 123 Ala. 439, 26 So. 290, which is a case of fraud in the inducement]; Wells v. Roye* Wheel Co. (Ky.) 114 S. W. 737; Chicago, etc., R. R. v. Curtis, 51 Neb. 442, 66 Am. St. Rep. 456, 71 N. W. 42.
5 Heck v. Missouri Pacific Ry. Co., 147 Fed. 775.
6 Wells v. Royer Wheel Co. (Ky.), 114 S. W. 737 [citing in support of such doctrine, cases in which restitution was actually made, as Louisville Veneer Mills, v. Clemonts (Ky.), 109 S. W. 308, 33 Ky. L. R. 106; Louisville & N. Ry. v. Helm, 121 Ky. 645, 89 S. W. 709, or cases in which fraud as to the contents was not shown to exist: Cunningham v. Belknap (Ky.), 60 S. W. 837, 22 Ky. L. R. 1580, or cases in which fraud was alleged in general terms without setting forth facts which would show fraud in the inducement: Home Benefit Society v. Muehl, 109 Ky. 479, 59 S. W. 520. The case of Louisville & N. Ry. v. McEIroy, 100 Ky. 153, 37 S. W. 844, which is also cited, tends to support the rule laid down in Wells v. Royer Wheel Co. (Ky.), 114 S. W. 737].
7 Ingram v. Covington, F. & A. Ry. Co. (Ky.), 89 S. W. 541.
8 Ingram v. Covington, F. & A. Ry. Co. (Ky.), 89 S. W. 541.
9 Ingram v. Covington, F. & A. Ry. Co. (Ky.), 89 S. W. 541.
1 California. Moore v. Copp, 119 Cal. 429, 51 Ac. 630.
Georgia. Hansford v. Freeman, 99 Ga. 376, 27 S. E. 706.
Iowa. Williams v. Hamilton, 104 la. 423, 65 Am. St. Rep. 475, 73 N. W. 1029; Stead v. Sampson, - la. - , 155 N. W. 978.
lessor is induced to execute a lease;2 where the oral agreement specified what kind of crops should be raised upon certain portions of the farm, and the lease as prepared by the lessee omitted such provisions,3 such lease may be reformed so as to express the oral agreement. If the oral agreement of the parties provides for a deed, and by the fraud of the owner of the land, the written instrument which is delivered is merely an option,4 or if the oral agreement provides for a deed with a reservation of timber, and the grantee attempts knowingly to take advantage of the fact that by mistake of the grantor the deed is so drawn as to omit such reservation,5 or if the deed contains restrictive covenants which are inconsistent with the contract in performance of which the deed was given,6 or if an oral contract provides for a building of a certain size, and by the fraud of the builder, the written contract is so drawn as to provide for a smaller building,7 the instrument may be reformed in each case so as to express the real intention of the parties. If the oral contract for an exchange of land provides that one tract is to be taken subject to the mortgage thereon, and in the written deed, there is fraudulently inserted a clause to the effect that the grantee assumes and agrees to pay such mortgage, such deed may be reformed so as to conform to the oral agreement.8 If the owner of land agrees to pay a commission for selling the land at one hundred thirty-seven dollars an acre, and the con-
Kansas. Wait v. McKibben, 92 Kan. 394, 140 Ac. 860.
Kentucky. Scott v. Spurr, 169 Ky. 575, 184 S. W. 866.
Minnesota. Barnum v. White, 128 Minn. 58, 150 N. W. 227.
Nebraska. Sailing v. Morrell,97 Neb. 454, 150 N. W. 195.
New Jersey. Lloyd v. Hulick, 69 N. J. Eq. 784, 115 Am. St. Rep. 624, 63 Atl. 616; Zarecki v. Realty Co., 82 N. J. Eq. 489, 89 Atl. 513.
North Carolina. Torrey v. McFadeyn, 165 N. Car. 237, 81 S. E. 296.
Oregon. Bradshaw v. Trust Co., 81 Or. 55, 158 Ac. 274.
Rhode Island. Bowen v. Wolff, 23 R. I. 56, 49 Atl. 395.
Texas. Conn v. Hagan, 93 Tex. 334, 55 S. W. 323; Aetna Ins. Co. v. Bran-non, 99 Tex. 391, 2 L. R. A. (N.S.)
548, 89 S. W. 1057; American, etc., Co. v. Pace, 23 Tex. Civ. App. 222, 56 S. W. 377; Pioneer, etc., Co. v. Bau-mann (Tex. Civ. App.), 58 S. W. 49.
2 Moore v. Copp, 119 Cat. 429, 51 Ac. 630; Bowen v.Wolff, 23 R. I. 56, 49 Atl. 395.
3 Scott v. Spurr, 169 Ky. 575, 184, S. W. 866.
4 Torrey v. McFadeyn, 165 N. Car. 237, 81 S. E. 296.
5 Sills v. Ford, 171 N. Car. 733, 88 S. E. 636.
6 Lloyd v. Hulick, 69 N. J. Eq. 784, 115 Am. St. Rep. 624, 63 Atl. 616.
7 Zarecki v. Realty Co., 82 N. J. Eq. 489, 89 Atl. 513.
8 Stead v. Sampson, - la. - , 155 N. W. 978; Bradshaw v. Trust Co., 81 Or. 55, 158 Ac. 274, tract as written by the agent fixes the price at thirty-seven dollars, and the agent reads the contract to the owner of the land as a contract fixing the price at one hundred thirty-seven dollars an acre, such contract will be reformed so as to fix the price at one hundred thirty-seven dollars.9
Where there was, in fact, an oral agreement between the parties, and the written instrument is executed as a means of embodying the intention of the parties in writing or as a performance of such oral agreement, reformation gives effect to the actual agreement into which the parties have entered. If equity has power to give reformation this is the class of cases in which such remedy will most clearly give a just result. The fact that the failure of such instrument to express the real intention of the parties is due to the fraud of the party against whom relief is sought is an additional reason for giving equitable relief in a case of mutual mistake; and it is not a reason for denying such relief.10 If, however, the parties have no prior oral agreement and the only contract is one which is made by the written offer and the acceptance thereof, the result which is reached by reformation is equally satisfactory to everybody except the party who is guilty of fraud, but it is not so easy to explain such remedy on the theory of contract law. The party who is guilty of fraud is held to an offer which he did not make in terms, and which he did not intend to make. Even at the sacrifice of logical consistency, however, the courts have felt that if reformation is to be given as against a party who makes an innocent mistake, it should be given against one who is guilty of deliberate fraud. It may be said that equity will treat the written offer as varied by the oral explanation or statement of its contents, although common law would not permit it to be varied in this fashion. We then have an offer which is accepted by the person to whom it is made, and which accordingly may be enforced against the party who made it, even if he made it with a mental reservation, and did not intend to be bound by the terms which led the adversary party to believe were incorporated in the written contract. The same result may be reached by the short, though not always satisfactory, answer that the party who misled the other as to the terms of the contract is estopped to deny that the contract does not contain the terms which he induced the adversary party to believe that it contained.
9 Turner v. Bray, 72 Or. 334, 143 Ac. 1011.
10 "The difference between ordinary mutual mistake and the situation here presented is not such as to justify punishing the defendant (the innocent party) and rewarding the plaintiff (the party guilty of the fraud)": Wait v. McKibben, 92 Kan. 394, 140 Ac. 860.
In some jurisdictions reformation is refused if the party who seeks relief was guilty of negligence.11 The fact that the grantee who prepares the deed makes no exception in the warranty clause, although he knows that there is a valid lease of such property, does not justify a court of equity in reforming such instrument if the vendor has an opportunity to read it.12 It has been said that reformation will not be granted for a misdescription of the property conveyed, although the grantor did not know of such error, and although the grantee took advantage of such mistake.13 This view may usually be explained on the theory that the evidence did not show the existence of any contract other than that evidenced by the written instrument, reformation of which is sought.14
11 Weinhard v. Summerville, 46 Wash. 127, 13 L. R. A. (N.S.) 1089, 89 Ac. 490.
12 Weinhard v. Summerville, 46 Wash. 127, 13 L. R. A. (N.S.) 1089, 89 Ac. 490.
13 Cherry v. Brizzolara, 89 Ark. 309, 21 L. R. A. (N.S.) 508, 116 S. W. 668. (This holding, however, seems to be obiter, as the evidence did not show clearly that the grantee knew of such mistake.)
14 See eh. LXX.