CHAPTER 4 – Reformation of Instruments (Articles 1359-1369)

CHAPTER 4 REFORMATION OF INSTRUMENTS

(Arts. 1359-1369)

STUDY GUIDE :

1. What is “reformation of instruments” as a remedy at law?

Reformation is that remedy in equity by means of which a written instrument is changed, modified or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed.

2. What is the rationale for the doctrine of reformation?

It would be unjust and inequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties.

3. What are the requisites of an action for reformation of instrument?

(a) There must be a meeting of the minds between the parties to the contract.(b) The instrument must not express the true intention of the parties.(c) The failure to express the true intention must be due to either of the following causes:

(a.1.) Mistake (of fact) - mutual (Art. 1361) or unilateral (Art. 1362)

(a.2.) Fraud - active (Art. 1362) or passive (Art. 1363)

(a.3.) Inequitable conduct (Art. 1362)

(a.4.) Accident (Art. 1364)

(d) There must be clear and convincing proof of the said causes.

4. What instruments cannot be the proper subject of reformation?

(a) Simple donations inter vivos wherein no condition is imposed. [Art. 1366(1)]Reason : Donation is essentially gratuitous and the donee, therefore, has no cause for

complaint.

(b) Wills. [Art. 1366(2)]Reason : The making of a will is strictly a personal act. They cannot be reformed except

by the testator himself.

(c) Void agreements. [Art. 1366(3)]Reason : Void contracts are inexistent, so there is nothing to reform.

(d) Instruments for which an action to enforce has been brought by one of the parties. (Art. 1367)Reason : In such case, there is estoppel, waiver or ratification by such party.

5. Who may file an action for reformation of instrument? (Art. 1368)

(a) If the mistake is mutual, either of the parties or their successors in interest.(b) In all other cases, the injured party or his heirs and assigns.

APPLICATION/PROBLEMS :

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CHAPTER 4 – Reformation of Instruments (Articles 1359-1369)

1. S owns two (2) cars: a BMW 525i worth P3.9M and a BMW 320i worth P2.1M. Today, S offers for sale to B the BMW 320i for 3.5M. B accepts the offer of S because B thinks all the while that S is offering his BMW 525i, and not the BMW 320i. In the instrument of sale, however, as drafted, the car specified as object of the sale is the BMW 320i. Can B ask for reformation?

2. S agreed with B that S would be loaned P10M by B. In the contract, however, drafted by B, it was stated that S was selling his house to B for said amount. It had been B’s experience in previous transactions that S outrightly signed their contracts without examining the same but relied in good faith on the representations of B. As expected, S subsequently signed the contract in the belief that it was really a contract of loan. Who, if any, may ask for the reformation of the instrument?

3. S sold B a house. S fraudulently made the contract one of mortgage instead of sale. Both signed the contract of mortgage, with B believing all the time that it was a contract of sale. Later, B brought an action to foreclose the mortgage and at the same time brought an action to reform the contract of mortgage on the ground that S had acted fraudulently in making him (B) sign a contract of mortgage when what they had in fact agreed upon was a contract of sale over the house of S. If B is able to positively prove the fact of fraud on the part of S, may the contract of mortgage be reformed in favour of B?

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