Reformation, as a form of equity, can mold its relief to attain any fair result within the broadest perimeter of the agreement the parties have established for themselves.
Plaintiff entered into an agreement with defendant to produce weaponry. After plaintiff began production, it determined that the equipment contemplated by the parties was insufficient to adequately perform. Plaintiff purchased appropriate equipment at considerable expense and instituted suit to recover losses resulting from the unexpected costs.
Whether the parties' contract should be reformed to equally allocate the loss sustained.
Yes, the parties' contract should be reformed to equally allocate the loss sustained.
The court determined that reformation of the contract was appropriate because the case involved a mutual mistake; the contract allocated the specific risk to neither party; and the defendant received the benefit of extra work of the type contemplated by the contract and would have been willing, if facts had been known from the beginning, to share a substantial portion of the additional expenses. Thus, equity supported a ruling that the parties share the unexpected expenses.