Can a Fraud Claim Be Used As The Basis to Revise A Written Contract?

Gholian Law’s Los Angeles Litigation Attorneys were recently asked to determine if a fraud claim provided acceptable grounds for revising the provisions of a written contract (such revisions are also referred to as a “contract reformation”). In the case of fraud or mutual mistake, California law allows written contracts to be revised if the written agreement does not truly express the intention of the parties to the contract. On these grounds, a contract reformation is acceptable, provided the rights acquired by third person(s) are not prejudiced. [See Cal. Civ. Code § 3399.]

Pleading a reformation of contract requires the demonstration of three elements:

1. The agreement was intended but not executed
2. The actual agreement is in writing
3. Where or how the actual writing fails to reflect the intended agreement

If the reformation request is due to fraud, according California law, the fraud in question must be specifically stated.

The burden of proof in trial falls upon the party seeking to avoid execution of the original written agreement. This burden is attributed to the reform-seeking party because it’s presumed that: “All the parties thereto intended to make an equitable and conscientious agreement.” [See Cal. Civ. Code § 3400.] The burdened party must also prove the true intent of the parties with the presentation of clear and convincing evidence. [See Shupe v. Nelson, (1967) 254 Cal. App. 2d 693, 700.] This is greater evidentiary threshold than most civil actions, which only require a preponderance of evidence. If a party carries its burden, then a contract may be revised and specifically enforced. [See Cal. Civ. Code § 3402.]