Define: Reformation

The act of changing a written contract when one of the parties can prove that the actual agreement was different than what’s written down. The changes are usually made by a court when both parties overlooked a mistake in the document, or when one party has deceived the other.

An improvement (or an intended improvement) in the existing form or condition of institutions or practices etc.; intended to make a striking change for the better in social or political or religious affairs. n. the correction or change of an existing document by court order upon petition of one of the parties to the document. Reformation will be ordered if there is proof that the parties did not intend the language as written or there was an omission due to mistake or misunderstanding. Quite often a party petitions for reformation when one or both parties realise the effect of the document as written is different from what was expected but it has already been recorded or filed with a governmental agency. Examples: a paragraph is omitted from a trust which results in the transfer to the trust being a gift subject to gift tax, and which needs to be corrected to keep the state taxing authority from demanding payment. The attorney writing the final draft of a limited partnership agreement writes in a calculation which would triple the profit to a limited partner above the amount discussed by the parties, and when the limited partner refuses to change the document, the general partner sues for reformation.