Opinion ID: 202449
Heading Depth: 2
Heading Rank: 2

Heading: Mutual mistake and contract reformation under Massachusetts law

Text: 12 Under Massachusetts law, a written contract may be reformed if its language does not reflect the true intent of both parties. Polaroid, 610 N.E.2d at 917; see also Berezin v. Regency Sav. Bank, 234 F.3d 68, 72 (1st Cir.2000); John Beaudette, Inc. v. Sentry Ins. A Mut. Co. 94 F.Supp.2d 77, 142-43 (D.Mass.1999); Mickelson v. Barnet, 390 Mass. 786, 460 N.E.2d 566, 569 (1984). Massachusetts courts have referenced the approach to mutual mistake articulated in the Restatement (Second) of Contracts. See, e.g., Nissan Autos. of Marlborough, Inc. v. Glick, 62 Mass.App.Ct. 302, 816 N.E.2d 161, 165 (2004); Howell v. Glassman, 33 Mass.App.Ct. 349, 600 N.E.2d 173, 175 (1992). The Restatement summarizes the applicable principles as follows: 13 Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effect of the writing, the court may at the request of a party reform the writing to express the agreement, except to the extent that rights of third parties such as good faith purchasers for value will be unfairly affected. 14 Restatement (Second) of Contracts § 155 (2006). When a party asks for reformation of a contract, it is not asking the court to interpret the contract but rather to change it to conform to the parties' intent. See id. cmts. a, b. Accordingly, the usual restrictions on contract interpretation, such as the parol evidence rule, do not apply to a court's inquiry into the parties' intent. See Berezin, 234 F.3d at 72; Polaroid, 610 N.E.2d at 917. In a reformation case, it does not matter that a contract unambiguously says one thing. A court still will accept extrinsic evidence in evaluating a claim that both parties to the contract intended it to say something else. 15 The critical limitation in a contract reformation case is the burden of proof: to be entitled to reformation, a party must establish that the undisputed material facts fully, clearly, and decisively show[] a mutual mistake, Polaroid, 610 N.E.2d at 918; see also Lordi v. Lordi, 443 Mass. 1006, 820 N.E.2d 813, 814 (2005). Although [t]he classic case for reformation is when the mutual mistake can be traced to a typo or transcription error, a scrivener's error is not a prerequisite for reformation. E. Allan Farnsworth, Farnsworth on Contracts § 7.5 (2001). Mutual mistakes justifying contract reformation may result simply from the parties' inattention. See, e.g., Polaroid, 610 N.E.2d at 917 (discussing mistaken omission of a pollution exclusion from policies); De Vincent Ford Sales, Inc. v. First Mass. Corp., 336 Mass. 448, 146 N.E.2d 492, 494 (1957) (basis for equitable relief sufficiently set forth where allegations claim mistake resulting from inadvertence of the parties). Such is the mistake urged by OneBeacon, which claims that neither it nor LAI realized—or intended—that the policy's broad definition of an insured extended coverage to LAI's lessees who had not independently insured the vehicles with OneBeacon. 16 The mistake that OneBeacon must demonstrate—to a high degree of certainty—is not that the outcome of its agreement differed from its expectations, but rather that the contract language did not express the agreement as originally intended. See Restatement 2d § 155 cmt. a (The province of reformation is to make a writing express the agreement that the parties intended it should.). The distinction is between a contract that does not accurately reflect (hence misrepresents) the agreement of the parties and a contract that accurately reflects the intent of the parties but is premised on some mistaken fact. Reformation is not available to correct mistaken factual assumptions about the parties' bargain, but may be used to correct misrepresentations of the parties' contractual intent. The distinction is perhaps best understood through an illustration. If, for example, two parties intended their agreement to cover the sale of 100 acres in Boston, but the contract erroneously identified a different piece of property in Providence, their mutual mistake could provide the basis for reformation. If, however, the contract correctly referred to the intended sale of 100 acres in Boston, but the parcel turned out to be only 90 acres, the mistake would not concern the representation of their intent—and reformation could not be used to amend the original agreement. See Restatement 2d § 155 cmts. a, b. In short, reformation fixes a mistaken writing; it is not meant to fix a mistaken agreement. 17 Even if a mutual mistake in representation is proven, however, reformation may not necessarily be awarded. Since the remedy of reformation is equitable in nature, a court has the discretion to withhold it . . . on grounds that have traditionally justified courts of equity in withholding relief. Restatement 2d § 155 cmt. d; see also Howell, 600 N.E.2d at 175; Farnsworth on Contracts, supra, § 7.5. For example, where the rights of third parties such as good faith purchasers for value will be unfairly affected, reformation may be withheld even if otherwise appropriate. Restatement 2d § 155.