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.
Where A is entering into a written contract under mistake as to its contents, and the circumstances are such that if B, too, were mistaken, reformation would be given on A's application, a still clearer case for reformation exists where B knew of A's mistake and took advantage of it, or by his own conduct or representations led him into such mistake.1 The difference between this class of cases and the general types of cases where reformation is allowed, is that there is no valid oral prior agreement here, to which both parties have really assented and to which the written contract is to be reformed to conform. However, the party who led the other into mistake or took advantage of the mistake, is not allowed to deny that the contract which he induced the adversary party to think he was making, is not in force, as it would have been had the mistake not been made. It is in cases of this sort that equity comes the nearest to making a new contract for the parties. Thus where B misleads A as to the description of the specific property contracted for;2 or as to the amount to be paid; 3 or as to the time for which the contract is to run;4 or where A is a member of a firm which has made an oral contract with B, and on reducing it to writing B inserts a term and falsely represents to A that his copartner has assented thereto;5 or where the lessee in preparing the lease omits a covenant with reference to cultivation, presents it to the lessor's agent and induces him to sign when he is so engrossed in business so as not to notice such omission,6 A may have the mistake corrected and the contract, as reformed, enforced with the mistake eliminated, though B did not intend to be bound thereby. Reformation may be given for a mistake caused by an innocent misrepresentation by the adversary party.7 Reformation may also be given where A understands that he is contracting for a given subject-matter and the adversary party, B, knows that A will not receive such property by the terms of the contract as executed.8 So where the grantee knows that the grantor believes that a coal vein under the realty conveyed is excepted from the operation of such conveyance, when in fact it is not, and grantee knows that it is not, reformation will be granted.9
James v. Couchman, 20 Ch. Div. 212; Deischer v. Price, 148 111. 383, 36 N. E. 105; Van Brunt v. Wisconsin Consistory Home Association, 163 Wis. 540, 158 N. W. 205.
1 United States. Simmons Creek Coal Co. v. Doran, 142 U. S. 417, 35 L. ed. 1063; Bowers v. Ins. Co., 68 Fed. 7S5: Home Ins. Oo. v. Chemical Co., 109 Fed. 681.
Alabama. Jones v. Johnston, 193 Ala. 265, 69 So. 427.
California. Higgins v. Parsons, 65 Cal. 280, 3 Pac. 881.
Illinois. Deischer v. Price, 148 111. 383, 36 N. E. 105; Koch v. Streuter, 218 111, 546, 2 L, R. A. (N.S.) 210, 75 N. E. 1049.
Indiana. Roszell v. Roszell, 109 Ind. 354.
Iowa. Winans v. Huyck, 71 Ia. 459, 32 N. W. 422; Williams v. Hamilton, 104 Ia. 423, 65 Am. St. Rep. 475, 73 N. W. 1029; Sutton v. Risser, 104 Ia. 631, 74 N. W. 23.
Kentucky. Scott v. Spurr, 169 Ky. 575, 184 S. W. 866.
Michigan. Goodenow v. Curtis, 18 Mich. 298.
Minnesota. Smith v. Jordan, 13 Minn. 264, 97 Am. Dec. 232; Crookston Imp. Co. v. Marshall, 57 Minn. 333, 47 Am. St. Rep. 612, 59 N. W. 294; Stanek v. Libera, 73 Minn. 171, 75 N. W. 1124.
Mississippi. Becker v. Dunagin, 113 Miss. 338, 74 So. 275.
Montana. Sanford v. Gates, 21 Mont. 277, 53 Pac. 749.
New Jersey. Smith-Austermuhl Co. v. Jersey Rys. Advertising Co., 89 N. J. Eq. 12, 103 Atl. 388.
New Mexico. Cleveland v. Bateman, 21 N. M. 675, 158 Pac. 648.
New York. Welles v. Yates, 44 N. Y. 525; Husted v. Van Ness, 158 N. Y. 104, 52 N. E. 645.
North Carolina. Day v. Day, 84 N. Car. 408; Jones v. Warren, 134 N. Car. 390, 46 S. E. 740; Sills v. Ford, 171 N. Car. 733, 88 S. E. 636; America Potato Co. v. Jeanette Bros. Co., 174 N. Car. 236 [sub nomine, American Potato Co. v. Jennette Bros. Co., 93 S. E. 795].
North Dakota. M. Sigbert Awes Co. v. Haslam, 37 N. D. 122, 163 N. W. 265.
Oregon. Archer v. Lumber Co., 24 Or. 341, 33 Pac. 526; Markwart v. Kliewer, 75 Or. 574, 147 Pac. 553; Brad-shaw v. Provident Trust Co., 81 Or. 55, 158 Pac. 274.
South Dakota. McCormick, etc., Co v. Woulph, 11 S. D. 252, 76 N. W. 939.
Tennessee. Graham v. Guinn (Tenn. Ch. App.), 43 S. W. 749; McCormick v Ratcliffe (Tenn. Ch. App.), 64 S. W. 332.
West Virginia. Smith v. Board of Education, 76 W. Va. 239, 85 S. E. 513
Wisconsin. Dane v. Derber, 28 Wis. 216; James v. Cutler, 54 Wis. 172, 10 N. W. 147; Kyle v. Fehley, 81 Wis. 67, 29 Am. St. Rep. 866, 51 N. W. 257.
2 Jones v. Johnston, 193 Ala. 265, 69 So. 427; Becker v. Dunagin, 113 Miss. 338, 74 So. 275; McCormick, etc., Co. v. Woulph, 11 S. D. 252, 76 N. W. 939; McCormick v. Ratcliffe (Tenn. Ch. App.), 64 S. W. 332.
3 Sanford v. Gates, 21 Mont. 277, 53 Pac. 749; Graham v. Guinn (Tenn. Ch. App.), 43 S. W. 749.
4 Smith-Austermuhl Co. v. Jersey Rys. Advertising Co., 89 N. J. Eq. 12, 103 Atl. 388.
5 Sutton v. Risser, 104 Ia. 631, 74 N. W. 23.
6 Scott v. Spurr, 169 Ky. 575, 184 S. W. 866.
7 Bush v. Merriman, 87 Mich. 260, 49 N. W. 567.
8 Stevens v. Holman, 112 Cal. 345, 53 Am. St. Rep. 216, 44 Pac. 670.
9 Cook v. Liston, 192 Pa. St. 19, 48 Atl. 389.
Since reformation will not be granted unless the instrument as reformed would be operative,10 it has been held that reformation will not be given in cases in which the grantor or vendor points out property to which he has no title and which does not conform to the description in the contract or conveyance.11 The reason for refusing reformation in such a case is that the party who has been misled can not recover the property itself by reason of the instrument as reformed, since such property does not belong to the grantor or vendor, and reformation as against the grantor or vendor can not operate as against the owner of such property. Accordingly, the grantee or vendee can recover only damages and he is entitled to damages without reformation.12 If the period of limitations for the action for damages for such deceit has not yet run, the plaintiff has nothing to gain by reformation. If the period of limitations had run when the fraud was discovered, it might make a very serious difference to the party who seeks relief, whether he can change the contract by reformation and bring an action upon such contract or upon the covenants in such deed for damages, or whether he is to be limited to his action in tort.
If from the entire contract it can be seen that a certain clause does not express the real intention of the parties, reformation can be had without showing specifically that the parties had a mutual understanding of what the term in question should really be. Thus where A took thirteen shares in a building and loan association, the by-laws of which, being a part of the contract, required a payment of one dollar per share per month, a clause in the note requiring a payment of twenty-six dollars per month on such shares may be corrected.13 This is really a question of construction, not reformation, and involves the principle that the paramount general intent prevails over an inconsistent subordinate particular intent.14
Under guise of reformation, equity can not make a new contract for the parties upon terms which it thinks fair and just.15
10See Sec. 2220.
11 Jahnke v. Seydel, 178 Ia. 363, 159 N. W. 986; Macey v. Furman, 90 Wash 580, 156 Pac. 548. If the injured party peeks rescission, the party who is guilty of such fraud can not raise the objection that reformation should have been sought. Macey v. Furman, 90 Wash. 580, 156 Pac. 548.
12 Jahnke v. Seydel, 178 Ia. 363, 159 X. W. 986.
13 Abbott v. Loan Association, 86 Tex. 467, 25 S. W. 620 [reversing, 23 S. W. 629].
14 See Sec. 2039.
15 Hyde v. Kirkpatrick, 78 Or. 466. 153 Pac. 488 [ denying rehearing, Hyde v. Kirkpatrick, 78 Or. 466, 153 Pac. 41]. See Sec. 2214 et seq.