Troubled Asset Solutions v. Wilcher

The gross negligence element of contract reformation requires “considering whether reformation would prejudice the other party to the transaction or a third party, as well as whether other equities may favor one party over the other.”

Petitioner appealed from the Court of Appeals’ reversal of the trial court’s decision to reform a contract made between the parties. Petitioner assigned error to the Court of Appeal’s failure to properly apply “the gross negligence requirement” when deciding whether the contract should be reformed. On appeal, Petitioner argued that the gross negligence element of the test requires consideration of equitable principles. In response, Respondent argued that the term “gross negligence” means “heightened negligence,” and that this definition does not consider principles of equity. The gross negligence element of contract reformation requires “considering whether reformation would prejudice the other party to the transaction or a third party, as well as whether other equities may favor one party over the other.” Using this standard, the Court determined that the Court of Appeals inappropriately applied the gross negligence standard when considering whether the contract should be reformed, because the Court of Appeals failed to consider whether the equities weighed toward reformation of the contract. Reversed and remanded.