Opinion ID: 2516976
Heading Depth: 4
Heading Rank: 1

Heading: The superior court correctly determined the existence of mutual mistake.

Text: We use a three-part test to determine whether there is a mutual mistake of fact. [9] To satisfy the test the party urging reform must show: (1) the mistake relates to a `basic assumption on which the contract was made,' (2) the mistake has a material effect on the agreed exchange of performances, and (3) the party seeking relief does not bear the risk of the mistake. [10] Wasser first argues that there was no mutual mistake and that therefore reformation was not available because the written agreement accurately conveyed the parties' oral agreement. [11] A court may only reform a contract if the words of the writing do not correctly express the meaning that the parties agreed upon. [12] Wasser essentially argues that the discovery of additional liens was irrelevant to the parties' agreement because the parties intended Wasser to be paid after KeyBank's payoff regardless of whether additional liens were later discovered. In effect Wasser asserts that Ritchie did not satisfy the second prong because the discovery of the additional liens did not have a material effect on the parties' agreed-upon performances. We disagree. It is undisputed that neither party was aware of the additional senior lien holders when the parties entered into Release # 2. Both parties believed that Key-Bank was the only senior lien holder on the seven pieces of equipment in which Wasser held a security interest and this belief was a basic assumption of the agreement. The presence of the additional lien holders materially altered the agreement because it significantly reduced the net proceeds from the Thomas auction.