A&T Siding, Inc. v. Capitol Specialty Insurance Corp.

Under the equitable doctrine of reformation, mistakes of law regarding the effect of the terms of the written agreement cannot be corrected by reformation of the contract.

The Court of Appeals for the Ninth Circuit certified the following question: Whether the parties may amend a settlement to revive the potential liability of an insurance company. The Court held that parties may amend a previous contract, but in order to invoke the equitable doctrine of reformation in Oregon, the parties needed to prove three factors by clear and convincing evidence: (1) an antecedent agreement to which the contract can be reformed; (2) a mutual mistake; and (3) the party seeking reform cannot have been grossly negligent. Wanting or intending for the terms of the original agreement to have a different outcome is not the same as an antecedent agreement that was not properly reflected in the contract. Additionally, the Court recognized a distinction between mistakes of law and mistakes as to the terms of the agreement. A mistake as to the terms of the agreement itself is not eligible for reform. However, mistakes of fact or mistakes of law as to the effect of an underlying agreement that resulted in a contract that does not accurately express the substance of the agreement may be reformed. The mistake in the case at issue was to the effect of the terms themselves and is therefore not eligible for reform.