BAC 2 - Obligations & Contracts (#9) (DO NOT share this lecture notes)

SDSSU
Lea Andrelei Banasig

REFORMATION OF INSTRUMENTS
It is a remedy to conform to the real intention of the parties due to mistake, fraud, inequitable conduct,
accident.

Reformation is a remedy in equity by means of which a written instrument is made or construed so as to

express or confirm the real intention of the parties when some error or mistake is committed.

Rationale: 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.

Requisites in reformation of instruments

1. Meeting of the minds to the contract;

2. True intention is not expressed in the instrument;

3. By reason of: (MARFI)

a. Mistake;

b. Accident;

c. Relative simulation;

d. Fraud; or

e. Inequitable conduct

4. Strong, clear and convincing proof of MARFI

When there is no meeting of the minds, the proper remedy is annulment and not reformation.

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BAC 2 - Obligations & Contracts (#9) (DO NOT share this lecture notes)
SDSSU
Lea Andrelei Banasig

Reformation of instruments; when allowed

1. Mutual mistake. – When the mutual mistake of the parties causes the failure of the instrument to
disclose their agreement (NCC, Art. 1361);

Requisites: a. The mistake should be of fact;

b. The same should be proved by clear and convincing evidence; and
c. the mistake should be common to both parties to the instrument

2. Mistake on one party and fraud on the other. – In such a way that the instrument does not show their
true intention, the party mistaken or defrauded may ask for the reformation of the instrument;

3. Mistake on one party and concealment on the other. – When one party was mistaken and the other
knew or believed that the instrument did not state their real agreement, but concealed that fact from the
former;

4. Ignorance, lack of skill, negligence or bad faith. – When through the ignorance, lack of skill, negligence
or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does
not express the true intention of the parties;

5. Right of repurchase. – If the parties agree upon the mortgage or pledge of real or personal property,
but the instrument states that the property is sold absolutely or with a right of repurchase

Operation and effect of reformation It relates back to, and takes effect from the time of its original
execution, especially as between the parties.

Reformation of instruments may be availed of judicially or extrajudicially.

Prescriptive period in reformation of instruments 10 years from the date of the execution of the
instrument.

Persons who can ask for the reformation of the instrument

It may be ordered at the instance of:

1. Either party or his successors in interest (if the mistake is mutual);

2. Upon petition of the injured party; or

3. His heirs and assigns

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BAC 2 - Obligations & Contracts (#9) (DO NOT share this lecture notes)
SDSSU
Lea Andrelei Banasig

INTERPRETATION OF CONTRACTS
If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the
former.

In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered.

Principle of effectiveness in contract interpretation

Pursuant to this principle, where two interpretations of the same contract language are possible, one
interpretation having the effect of rendering the contract meaningless while the other would give effect
to the contract as a whole, the latter interpretation must be adopted.

Contracts of Adhesion

These contracts are so-called because almost all their provisions have been drafted by one party, and the
only participation of the other party is the signing of his signature or his “adhesion” thereto on the “take
it or leave it” basis, without the right to modify it.