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.
In a number of cases language is used which seems to imply that a party can not have reformation if the mistake for which he seeks relief has been due in any part to his negligence.1 Failure on the part of the party who seeks relief to read the instrument which he seeks to have reformed, has been said to be such a mistake as to prevent him from obtaining reformation.2 It has been said that failure to read a contract so as to comprehend its terms is a mistake of this sort,3 and it has even been suggested that a party who had an opportunity to inform himself of the contents of the instrument, can not have reformation, although the adversary party knew of the mistake and took advantage thereof.4
The courts which have laid down this principle have apparently failed to distinguish between the cases in which the parties entered into a valid contract and by mistake failed to set forth the terms of such contract in the writing to which they attempted to reduce it, and the cases in which an offeror has by mistake included terms in his offer which he did not mean to include, or in which the offeror has used the words in his offer which he meant to use, but in which he has been induced to make such offer by reason of mistake. In the cases of the two latter groups it is generally, held that if the offeree does not know of the mistake and does not take advantage of it, the offer and acceptance amount to a valid contract, since the offeree is entitled to rely upon the offer as it is communicated to him by the offeror without any regard to the actual state of mind of the offeror.5 If a valid oral contract has been entered into and reformation is granted, the party against whom such relief is granted does not lose any of the benefits of the bargain into which he entered, but he only loses the unfair advantage which he is seeking to gain by reason of the mistake of the adversary party. For these reasons some of the courts which appear to insist upon the theory that negligence on the part of the plaintiff will prevent reformation, have modified this principle so as to leave a number of cases in which negligence may exist and yet reformation may be granted. The existence of a mistake does not prevent reformation, since mistake is the basis of the right to reformation.6 Failure to read the instrument is said not to amount to negligence such as will prevent reformation, although the party who seeks relief could read and had an opportunity to read.7
1 Arkansas. Cherry v. Brizzolara, 89 Ark. 309, 21 L. R. A. (N.S.) 508, 116 S. W. 668 (obiter).
California. Burt v. Los Angeles Olive Growers' Association, 175 Cal. 668, 166 Pac. 993. (Under California statute.)
Oregon. Hyde v. Kirkpatrick, 78 Or. 466, 153 Pac. 41 [rehearing denied, Hyde v. Kirkpatrick, 78 Or. 466, 153 Pac. 488]; Manley v. Smith, 88 Or. 176, 171 Pac. 897.
Washington. Conrads v. Green, 92 Wash. 269, 159 Pac. 102.
Wyoming. Grieve v. Grieve, 15 Wyom. 358, 9 L. R. A. (N.S.) 1211, 80 Pac. 569.
2 Hyde v. Kirkpatrick, 78 Or. 466, 153 Pac. 41 [rehearing denied, Hyde v. Kirkpatrick, 78 Or. 466, 153 Pac. 488]; Manley v. Smith, 88 Or. 176, 171 Pac. 897; Conrads v. Green, 92 Wash. 269, 159 Pac. 102; Grieve v. Grieve, 15 Wyom. 358, 9 L. R. A. (N.S.) 1211, 80 Pac. 569
3 Bailey v. Lisle Manufacturing Co., 238 Fed. 257, 152 C. C. A. 3; Burt v. Los Angeles Olive Growers' Association, 175 Cal. 668, 166 Pac. 993. (Under California statute.)
"It is the duty of one, when he becomes a party to a written contract, to examine its provisions and determine for himself what obligations and what liabilities it imposes, and, if need be. to seek legal advice upon that subject. It is negligence, and clear failure to exercise ordinary care or diligence, for intelligent business men (one of whom is a lawyer) holding in their hands and reading a written contract which clearly states their agreement, to rely on any statement or assent made by the opposite party regarding the terms or obligation of the agreement, rather than upon the written terms themselves, and 'courts of equity will not relieve parties from the consequences of their own folly, or assist them when their condition is attributable to a failure to exercise ordinary care for their own protection.' "Bailey v. Lisle Manufacturing Co., 238 Fed. 257, 152 C. C A. 3.
4 Cherry v. Brizzolara, 89 Ark. 309, 21 L. R. A. (N.S.) 508, 116 S. W. 668 (obiter).
The true rule is said to be whether the party who seeks relief acted as a man of ordinary prudence in view of all the circumstances.8 The fact that the draftsman was a man of high repute and that he stated that the provision which was in fact omitted from the written contract had been interlined therein, was held to be sufficient to show that the party who sought relief had acted as a reasonably prudent man would act.9 Failure to read an instrument so as to comprehend it is accordingly held not to amount to negligence of itself.10 The result of these qualifications and exceptions is to leave comparatively little of the rule that negligence on the part of the person who seeks relief will prevent him from obtaining reformation.
5 See Sec. 270 et seq.
6 American Mining Co. v. Basin & Bay State Mining Co., 39 Mont. 476, 24 L. R. A. (N.S.) 305, 104 Pac. 525.
7 Cox v. Hall, 54 Mont. 154, 168 Pac. 519; Lloyd v. Hulick, 69 N. J. Eq. 784, 115 Am. St. Rep. 624, 63 Atl. 616; Bank v. Redwine, 171 N. Car. 559, 88 S. E. 878.
"When a complaint proceeding on the theory of mutual mistake alleges facts which command the inference of such mistake, unless deliberate fraud is imputed, such complaint sufficiently alleges mistake; that the term 'mistake' always involves the conception that the victim has been guilty of some degree of negligence which may or may not be excusable in the circumstances of the particular case; and that courts of equity are not bound by cast-iron rules, but are governed by rules which are flexible and adapt themselves to particular exigencies, so that relief will be granted when, in view of all the circumstances, to deny it would permit one party to suffer a gross wrong at the hands of the other." Cox v. Hall, 54 Mont. 154,168 Pac. 519 [citing, Hen-nessy v. Holmes, 46 Mont. 89, 125 Pac. 132; Parchen v. Chessman, 49 Mont. 326, Ann. Cas. 1916A, 681, 142 Pac. 631, 146 Pac. 469; Brundy v. Canby, 50 Mont. 454, 148 Pac. 315].
6 Bank v. Redwine, 171 N. Car. 659, 88 S. E. 878.
The great majority of the courts recognize the distinctions between a mistake which it is claimed prevents the contract from existing in the first instance, or which makes it voidable at best, and a mistake which is ground for reformation; 11 and they hold that where reformation is sought, negligence on the part of the party who seeks relief does not prevent him from having the written contract reformed so as to express the terms of the actual agreement.12 Where this theory is in force, failure to read the contract,13 or failure to read it so as to comprehend the provisions thereof,14 does not prevent reformation. If a party to a contract assumes that the subsequent instruments have been prepared in accordance with the terms of the contract, he is not guilty of such negligence as to prevent reformation.15 The fact that the party who seeks relief prepared the instrument himself, does not prevent him from having such instrument reformed so as to express the actual agreement of the parties.16
9 Bank v. Red wine, 171 N. Car. 559, 88 S. E. 878.
10 American Mining Co. v. Basin & Bay State Mining Co., 30 Mont. 476, 24 L. R. A. (N.S.) 305, 104 Pac. 525.
11 Perkins v. Kirby, 30 R. I. 343, 97 Atl. 884.
12 Iowa. Stead v. Sampson. - Ia. - , 155 N. W. 078.
Maryland. Coggins v. Carey. 100 Md. 204, 10 L. R. A. (N.S.) 1191, C6 All. 173.
North Carolina. America Potato Co. v. Jeanette Bros. Co., 174 N. Car. 23G [sub nomine, American Potato Co. v. Jennette Bros. Co., 03 S. E. 795].
Oregon. Bradshaw v. Provident Trust Co., 81 Or. 55, 158 Pac. 274.
Rhode Island. Perkins v. Kirby, 39 R. I. 343, 97 Atl. 884.
The negligence which precludes reformation is said to be negligence which amounts to "a violation of a positive duty." Welch v. Johnson, - Or. - , 184 Pac. 280.
13 Iowa. Pyne v. Knight, 130 Ia. 113, 106 X. W. 505; Stead v. Sampson, - Ia. - , 155 N. W. 078.
New Jersey. Lloyd v. Hulick, 69 N. J. Eq. 784, 115 Am. ft. Rep. 624, 63 Atl. 616.
New York. Albany City Savings Institution v. Burdick, 87 N. Y. 40.
Oregon. Bradshaw v. Provident Trust Co., 91 Or. 55, 158 Pac. 274.
Rhode Island. Perkins v. Kirby, 39 R. I. 343, 97 Atl. 8S4.
14 Coggins v. Carey, 106 Md. 204, 10 L. R. A. (X.S.) 1191, 66 Atl. 673; America Potato Co. v. Jeanette Bros. Co., 174 N. Car. 236 [sub nomine, American Potato Co. v. Jennette Bros. Co., 03 S. E. 795 ]; Perkins v. Kirby, 39 R. I. 343, 97 Atl. 884.