BM2304 09 Handout 1: Reformation of Contracts

A set of 100 vocabulary flashcards covering the concepts, requisites, grounds, and legal principles of the Reformation of Contracts as per Article 1359 and related Philippine legal standards.

Article 1359

Provision which states that when there has been a meeting of the parties’ minds to a contract, but their true intention is not expressed in the instrument because of mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of the instrument.

Reformation of the Instrument

That remedy allowed by law using which a written instrument is amended or rectified to express or conform to the real agreement or intention of the parties.

Reformation requirement: Meeting of the minds

A requisite where the parties have already agreed on the contract's object and consideration.

Annulment of a contract

The proper remedy when a mistake, fraud, inequitable conduct, or accident has prevented a meeting of the parties’ minds.

Mistake

A ground for reformation that must refer to the substance of the thing that is the object of the contract or to those conditions that have principally moved one or both parties to enter into the contract.

Fraud

A ground for the remedy of reformation when one party knows the instrument did not state the real agreement and concealed that fact from the innocent party.

Inequitable Conduct

Any act or omission that is unjust or unfair, serving as a ground for reformation if it causes the instrument to fail to express true intention.

Accident

A ground for the remedy of reformation when the instrument does not express the parties' true intention through ignorance, lack of skill, negligence, or bad faith on the part of the drafter.

Mutual Mistake

A requirement for reformation where both parties to the contract must be mistaken for the instrument to be reformed on the grounds of mistake.

Clear and convincing evidence

Evidence where the plaintiff must prove that it is substantially more likely than not that his claims are true.

Valid and existing contract

A necessary presupposition for the reformation of an instrument, implying that a meeting of minds has already occurred.

Defective contract

A type of contract presupposed in the annulment of a contract, where consent was vitiated or there was no meeting of minds.

Vitiated consent

A condition characterizing annulment rather than reformation, indicating that the meeting of minds was compromised.

Written instrument

The specific form the agreement must take for reformation to be possible, as it provides a basis for comparing the real and supposed agreement.

Oral agreement

A form of agreement that cannot be availed of for reformation because there is no basis for comparing the real agreement and the supposed agreement.

Mistake of fact

A requisite for the ground of mistake to justify reformation, emphasizing that the error must not be merely simulated.

Identity or qualifications of parties

Aspects of a contract that do not qualify as grounds for reformation unless they have been the principal cause of the contract.

Mortgage

Conveyance of conditional right of ownership on a property by its owner to a lender as security for a loan.

Pledge

Delivery of personal property to a creditor as security for a debt or for the performance of an act.

Absolute sale with right of repurchase

An instrument type that may be reformed if the parties actually agreed upon a mortgage or pledge instead.

Concealment

The act of hiding the fact that an instrument does not state the real agreement, which qualifies as fraud for reformation purposes.

Ignorance

One of the causes of failure to express true intention attributed to the person drafting the instrument under the ground of accident.

Lack of skill

A specific cause of failure in expressing intention by a drafter, clerk, or typist that falls under the ground of accident.

Negligence

One of the factors involving the person drafting the instrument that allows for the remedy of reformation under the ground of accident.

Bad faith of drafter

A condition where the person drafting the instrument intentionally fails to express the parties' true intention, falling under the ground of accident.

Simple donations inter vivos

Donations intended to take effect during the donor's lifetime wherein no condition is imposed and reformation is expressly prohibited.

Wills

A gratuitous act whereby a person controls the disposition of his estate after death, for which the remedy of reformation is prohibited.

Void agreement

An agreement that cannot be reformed because the remedy of reformation proceeds from the fact that the parties already have a valid agreement.

Action to enforce the instrument

A legal step which, if taken by a party, prevents them from later asking for that same instrument to be reformed.

Successors-in-interests

Individuals who may invoke the remedy of reformation in place of the party entitled to avail of the remedy.

Heirs

Parties who may invoke the remedy of reformation in place of the original party entitled to it.

Injured party

The specific party who may invoke the remedy of reformation in cases where the mistake is not mutual.

Don Juan

The donor in the example who intended to donate Lot A but whose deed pertained to Lot C.

Ernesto

The trusted butler in the donation example who could not file an action for reformation for a simple donation inter vivos.

Lot A

The property Don Juan told Ernesto he would donate.

Lot C

The property actually listed in the Deed of Donation in the Don Juan example.

Doña Imelda

The individual in the example whose will bestowed a house instead of a golden sewing machine.

Melinda

The seamstress in the example who could not avail of reformation against Doña Imelda’s will.

Golden sewing machine

The item Melinda was told she would receive, which differed from what was written in the will.

Marie

The party who defaulted on payment for a gown in the example regarding enforcement actions.

Victoria

The party who sued to recover $P300,000.00$ and thus lost the right to later reform the contract.

Swarovski-beaded gown

The object of the agreement between Marie and Victoria.

$$P300,000.00$$

The price involved in the agreement between Marie and Victoria concerning a Swarovski-beaded gown.

Donna

The party in the example who sold a cat named "Kitty" but the contract listed "Katy."

Grace

The buyer in the example where a mistake was made regarding the name of the cat sold.

Kitty

The name of the cat Donna and Grace actually agreed to sell.

Katy

The name written by mistake in the contract signed by Donna and Grace.

Technical rules of law

The rules under which a real contract cannot be enforced until it is reformed to express the parties' true intention.

Meeting of the parties’ minds

The essential element present in reformation but absent in annulment.

Purporting to embody the agreement

The description of the written instrument that fails to express the parties' true intention.

Substantially more likely than not

The specific standard of proof required by the clear and convincing evidence rule in reformation cases.

Innocent party

The party unaware of the mismatch between the instrument and the real agreement, entitled to seek reformation in cases of fraud.

Clerk or typist

Specific personnel whose ignorance or negligence can lead to an instrument being reformed on the ground of accident.

Gratuitous act

An act, such as a will, where the donee has no right to complain about what is given to them, making reformation unavailable.

Disposition of estate

The control a person is permitted to exercise over their property after death via a will.

Formalities prescribed by law

The requirements that must be followed for a person to control the disposition of their estate through a will.

Action to reform

The legal remedy sought to correct a written instrument to reflect the actual agreement.

Defaulted on payment

The failure to pay that led Victoria to sue Marie in the recovery of $P300,000.00$.

Donee

The recipient of a gift, mentioned in the context of simple donations and wills where reformation is restricted.

Rectified

A synonym for amended, used to describe the process of reforming a written instrument.

Difference between written and real agreement

The actual discrepancy required for a party to avail of the remedy of reformation.

Substance of the thing

A critical element of the object of a contract to which a mistake must refer to justify reformation.

Simulated mistake

A false or pretend mistake that does not qualify as a valid ground for the remedy of reformation.

Plaintiff

The party in a trial who must present clear and convincing evidence for reformation.

Direct cause

The relationship the mistake must have with the instrument's failure to state the real agreement to justify reformation.

Personal property

The type of property delivered to a creditor as security in a pledge agreement.

Real property

A category of property that can be subject to a mortgage or sold with a right of repurchase.

Unjust or unfair act

The definition provided for inequitable conduct within the requisites of reformation.

Meeting of minds failed

The situation where annulment, rather than reformation, is the proper remedy.

Vitiated

A term describing consent that has been compromised, leading to a defective contract and the remedy of annulment.

Expressly prohibited by law

The status of the remedy of reformation when applied to simple donations inter vivos or wills.

Meeting of minds presupposition

The underlying assumption that a valid agreement exists before reformation can be considered.

Instrument failure

The state where a written document does not express the parties' true agreement due to mistake, fraud, inequitable conduct, or accident.

Comparison of real and supposed agreement

The process that necessitates a written instrument for the remedy of reformation to exist.

Principal cause of the contract

The level of importance identity or qualifications must have to be considered a ground for reformation in cases of mistake.

Conveyance of conditional right

The definition of mortgage as a transfer of ownership rights for security purposes.

Performance of an act security

One of the purposes for which personal property is delivered to a creditor in a pledge.

Mistake in good faith

The condition of a party who was mistaken while the other party concealed the fact, allowing for reformation due to fraud.

Drafting person

The individual whose lack of skill or bad faith may lead to an instrument being reformed under the ground of accident.

Condition imposed in donation

An element that, if absent in simple donations inter vivos, prevents the donor's act from being reformed.

Donor's lifetime effectivity

The timing characteristic of inter vivos donations that differentiates them from wills.

Right to complain

Something a donee lacks regarding a gratuitous act like a will, precluding reformation.

Recover $P300,000.00$

The objective of Victoria’s lawsuit against Marie which barred her from seeking reformation.

Mutuality of mistake

The condition under which either of the parties may invoke the remedy of reformation.

Unilateral failure to express intention

The condition under which only the injured party may file for the reformation of the instrument.

Vitiation of consent

A ground for annulment which signifies the absence of a true meeting of the minds.

Correcting the instrument

The fundamental purpose of reformation when a valid contract exists but is poorly documented.

Prescribed formalities

The legal requirements that a will must follow to be valid.

Estate disposition

The legal transfer of a person's property that takes effect after their death, typically governed by a will.

Mortgage versus Sale

The situation where parties agree on a security interest but the document states an absolute sale, justifying reformation.

Pledge versus Sale with Repurchase

A scenario involving personal property where reformation is proper if the document incorrectly labels the agreement.

Clear and convincing evidence standard

A higher burden of proof than "more likely than not," used in reformation grounded on mistake.

Meeting of minds on object

A requisite of reformation where parties have agreed on what the contract is about.

Meeting of minds on consideration

A requisite of reformation where parties have agreed on the price or what is exchanged.

Mistake as to substance

A type of error relating to the core nature of the contract object that allows for reformation.

Reformation vs. Annulment

The distinction between fixing a valid contract's document and voiding a defective contract.

Actual difference requirement

The rule that there must be a real discrepancy between the writing and the agreement to justify reformation.

Unilateral mistake in Cat example

In the Donna and Grace example, if Donna alone caused the mistake, only Grace can file for reformation.

Mistake proven by evidence

A requisite for reformation stating that the error must be substantiated by a clear and convincing standard.

Instrument amendment

The process of changing the text of a written agreement to reflect actual intent.