Whether one loves or hates them, contracts are woven into the fabric of American commerce. Think about the process of buying a home, a car, or even a dog. You’ll be asked to read and sign one or more pieces of paper reflecting the terms of the deal, such as the purchase price, payment terms, warranties or lack thereof, etc. These pieces of paper, once signed by all parties, are probably contracts. Businesses large and small hire employees with contracts. Families hire real estate agents with contracts. Unless one lives in isolation on a remote island, contracts—whether written, oral, or implied—are likely unavoidable.
Sometimes parties make a deal orally and later write it down on paper. This process isn’t uncommon, even in modern business practices. It also is not free from error. Causes of errors that could occur in the transition from the spoken to the written word range from the decay of human memory, to typographical mistakes, to poor listening or reading comprehension skills of a third-party typist or scrivener, to software using a faulty “autocorrect” feature. There are other causes as well. The point is that the written document could end up being different from the agreement the parties reached.
It goes without saying that a certain percentage of the errors that occur during the transcription process are caught. One side or the other might read through the document, spot one or more errors, and get them corrected before placing any signatures on the document. Unfortunately, a certain percentage of the errors that occur during the transcription process are not caught. The result is a written “agreement”, signed by all parties, that does not reflect the actual terms of the deal.
At some point after the ink has dried, a party may realize that the document is not what was intended. This could be a scary moment. Seeing one’s signature on a document that is not consistent with expectations is not an event that the majority of people would welcome. The realization might ultimately leave the party with this question, or something similar: Is there anything that can be done at this point, or are the words contained in the flawed document now set in stone?
Thankfully, in some situations, there is a legal means through which one party or the other could have the document corrected to be in keeping with the parties’ agreement. This is called reformation. Contract reformation is an equitable remedy that is available to correct mutual mistakes of fact or fraud. Liggatt v. Employers Mut. Cas. Co., 273 Kan. 915, 926, 46 P.3d 1120, 1128 (Kan. 2002) (citing Black’s Law Dictionary 1285 (7th ed. 1999)). Reformation is a remedy through which a written instrument is made or construed to express or conform to the real intention of the parties, when some error or mistake has been committed. Liggatt, 273 Kan. at 926 (quoting 66 Am. Jur.2d, Reformation of Instruments § 1, pp. 226-27). “A reformation occurs when a court determines an instrument does not reflect the terms intended by the parties to it and then revises the terms written in the instrument to reflect the intent of the parties.” Id.
The Liggatt case continued to quote American Jurisprudence, a well-respected legal encyclopedia, as is relates to the remedy of reformation:
Reformation is based on the premise that the parties had reached an agreement concerning the instrument, but while reducing their agreement to written form, and as the result of mutual mistake or fraud, some provision or language was omitted from, inserted, or incorrectly stated in the instrument intended to be the expression of the actual agreement of the parties.
Id. If a court grants reformation, it merely revises a writing to express the parties’ prior agreement. Id. Through reformation, a court is not making a new contract but, rather, giving effect to the contract which the parties in fact made but which was not expressed in the writing executed by them. Id.
Kansas has recognized the remedy of reformation to reform written agreements. Jones v. Reliable Sec. Inc., 29 Kan. App. 2d 617, 632, 28 P.3d 1051, 1062 (Kan. Ct. App. 2001) (citing Conner v. Koch Oil Co., 245 Kan. 250, 254, 777 P.2d 821 (1989)). This is no revelation. What may favorably surprise readers is that Kansas will actually take into account an imbalance of knowledge or virtue of the parties with respect to the applicability of the reformation remedy. “[A] written instrument may be reformed where there is ignorance or mistake on one side and fraud or inequitable conduct on the other[.]” Id. at 633. Kansas cases have long adhered to this principle. Andres v. Claassen, 238 Kan. 732, 740, 714 P.2d 963, 969 (Kan. 1986). One can imagine the multitude of situations in which there may be ignorance or naiveté on one side of the negotiation table and artfully deceptive behavior or devious dealing on the other. One such situation would be the taking of a contract to an attorney and having language placed in the contract covering a matter not negotiated or discussed by the parties, remaining silent, and allowing the other side to be misled. Id. at 741. Reformation may thus be a way to correct an injustice committed by guileful actors against unsuspecting victims as opposed to merely a means to technically correct something as innocuous as a typographical error.
An amendment to the contract may come to mind as a less complicated means to resolve the underlying discrepancy between the agreement and what later appeared on paper. In a number of situations, this may be the most efficient way to bring the agreement and the document into harmony; however, an amendment would require both parties to agree to it, an unlikely scenario if one party to the deal is less than ethical. Parties may agree to modify their contract, but one party to the contract may not force an amendment upon the other. Torre v. Federated Mut. Ins. Co., 854 F. Supp. 790, 830 (D. Kan. 1994). Asking a fox to amend an agreement that he procured through inequitable means would be akin to asking a bank robber to return the cash to the teller’s drawer. Hope springs eternal.
Reformation, while a wonderful and useful tool, when available, should not be relied upon. It has been called an “ancient” remedy. Pizza Mgmt., Inc. v. Pizza Hut, Inc., 737 F. Supp. 1154, 1158 (D. Kan. 1990). A written agreement should not be prepared sloppily or reviewed hastily under the potentially mistaken hope that it will be later reformed by a court of law; besides, a reformation proceeding, whether successful or unsuccessful, likely isn’t going to be inexpensive as it relates to time, stress, and attorneys’ fees. Signing contracts without reading them is certainly not to be recommended. In any event, the remedy of reformation is not available to any given party forever: Kansas courts apply a five-year statute of limitations to reformation claims. Id. (citing Conner v. Koch Oil Co., 245 Kan. 250, 255, 777 P.2d 821 (1989)).
Hiring a professional to handle contracts would be a wise course of action. This law firm has extensive experience working with contracts, including writing, reviewing, amending, and litigating them. If you, your business, or your family has a contract-related legal issue, please contact us at 913-735-7707 or schedule with us here if we could potentially be of service. You may also wish to read about fundamental contract principles (in Kansas) on our blog.
Matthew T. Kincaid