Equity will not reform a written contract unless the mistake is shown to be the mistake of both parties; but it may rescind and cancel upon the ground of mistake of fact material to the contract of one party only.
(Civil Code 1895, § 3982; Civil Code 1910, § 4579; Code 1933, § 37-207.)
Law reviews.- For article, "Limitations on the Meaning and Impact of DeGarmo v. DeGarmo," see 4 Ga. St. B.J. 20 (1998).
JUDICIAL DECISIONSANALYSIS
The relief accorded by this section is relief which can be granted only by equity; in a simple action at law on a promissory note it is unavailable. Franklin v. Sea Island Bank, 111 Ga. App. 182, 141 S.E.2d 121 (1965).
Cited in Brown v. Carmichael, 149 Ga. 548, 101 S.E. 124 (1919); Hooper v. Rucker, 153 Ga. 306, 111 S.E. 901 (1922); Edwards v. Rozar, 155 Ga. 170, 116 S.E. 313 (1923); Williams v. Williams, 155 Ga. 622, 118 S.E. 195 (1923); Paris v. Treadaway, 173 Ga. 639, 160 S.E. 797 (1931); Sawyer Coal & Ice Co. v. Kinnett-Odom Co., 192 Ga. 166, 14 S.E.2d 879 (1941); Orient Ins. Co. v. Dunlap, 193 Ga. 241, 17 S.E.2d 703 (1941); Brooks v. Northwestern Mut. Life Ins. Co., 193 Ga. 522, 18 S.E.2d 860 (1942); Nalley v. New York Life Ins. Co., 48 F. Supp. 470 (N.D. Ga. 1943); Scott v. Gillis, 202 Ga. 220, 43 S.E.2d 95 (1947); Findley v. City of Vidalia, 204 Ga. 279, 49 S.E.2d 658 (1948); Wheeler v. Poole, 204 Ga. 477, 50 S.E.2d 326 (1948); Hood v. Connell, 204 Ga. 782, 51 S.E.2d 853 (1949); Jackson v. Brown, 209 Ga. 78, 70 S.E.2d 756 (1952); Farmers Whse. of Pelham, Inc. v. Collins, 220 Ga. 141, 137 S.E.2d 619 (1964); Cline v. Schuster, 221 Ga. 653, 146 S.E.2d 732 (1966); Westbrook v. Nationwide Ins. Co., 113 Ga. App. 299, 147 S.E.2d 819 (1966); Hartford Accident & Indem. Co. v. Walka Mt. Camp No. 565, Woodmen of World, Inc., 224 Ga. 194, 160 S.E.2d 833 (1968); William H. Benton Co. v. Irvindale Dairies, Inc., 224 Ga. 780, 164 S.E.2d 819 (1968); Seaboard Constr. Co. v. Clifton, 121 Ga. App. 247, 173 S.E.2d 436 (1970); Citizens Bank v. Barber, 123 Ga. App. 507, 181 S.E.2d 545 (1971).
Reformation
When mistake is relied on, the petition must allege the particular mistake and show how it occurred. Helton v. Shellnut, 186 Ga. 185, 197 S.E. 287 (1938).
The fact that a complainant does not in express terms allege that an instrument was erroneously executed through mutual mistake does not render it insufficient in law, if it alleges facts from which such a conclusion is reasonably deducible. Steadham v. Cobb, 183 Ga. 30, 196 S.E. 730 (1938).
A mistake that will justify reformation must be a mutual mistake. McCullough v. Kirby, 204 Ga. 738, 51 S.E.2d 812 (1949).
Mutual mistake can lead to reformation.
- Where the intent of the parties and their mutual mistake in having failed to notice the discrepancy between that intent and the written document was established by the evidence, the fact that the discrepancy resulted from the landlord's error as scrivener did not preclude reformation of the lease. Zaimis v. Sharis, 275 Ga. 532, 570 S.E.2d 313 (2002).
In a lender's suit for reformation of a security deed to reflect that a different parcel owned by the borrower was the collateral, rather than the parcel described in the deed, the trial court erred in granting summary judgment for the borrower because inconsistencies in the loan documents raised an issue of fact as to whether there was a mistake. JPMorgan Chase Bank v. Cronan, 355 Ga. App. 556, 845 S.E.2d 298 (2020).
Equity will not reform a written contract on account of a mistake unless the mistake was one of both parties; some particular mutual mistake and how it occurred must be alleged and plainly shown. Rawson v. Brosnan, 187 Ga. 624, 1 S.E.2d 423 (1939).
Rescission
1. Insolvency
Insolvency as basis for rescission of contract.
- While an absolute deed of conveyance will not be canceled, at the instance of the grantor, merely because of a breach by the grantee of a promise made by him, in consideration of which the deed was executed, and the remedy of the grantor in such a case is a suit for damages for such breach, yet where the grantee was insolvent, and 49 shares of stock were transferred to her in consideration of her learning the plaintiff's business and assisting in its operation, which service she failed and refused to render to the plaintiff, equity would decree a cancellation of the stock certificate and restore the same to the grantor. McGhee v. Minor, 188 Ga. 635, 4 S.E.2d 565 (1939).
The grantor may maintain an equitable action to rescind the contract if the grantee is insolvent, or where fraud is employed by the grantee in the procurement of the deed, or there are other special facts which would make rescission by the grantor an appropriate relief. Although insolvency is frequently relied upon, breach of a contract for care and maintenance of the grantor upon the property conveyed present such special facts as authorize rescission. Head v. Walker, 243 Ga. 108, 252 S.E.2d 440 (1979).
2. Ignorance of Fact
Ignorance of fact insufficient as basis for rescission of contract.
- While this section provides that equity may rescind and cancel a written contract upon the ground of mistake of fact material to the contract of one party only, ignorance of fact is no cause for rescinding a contract; and where by reasonable diligence the plaintiff could have ascertained the extent of his injuries, and there was no necessity for his rushing into a settlement, § 9-3-33 giving him two years in which to bring an action to recover for such injuries, a court of equity will not relieve him from the injurious, unwise, or disadvantageous consequences of his own act in executing a release. James v. Tarpley, 209 Ga. 421, 73 S.E.2d 188 (1952).
When the intention of both the insurer and the insured as to the amount of the premium is expressed in the application, as corrected by the insurer as therein authorized, to be $302.90 per quarter, a mistake of the draftsman of the insurer in writing into the policy at another place the amount of the premium as being $750.48 per year, instead of what the insurer claims to have been intended, $750.48 per quarter, is obviously the unilateral mistake of the insurer alone, and there is neither mutuality nor fraud that would authorize reformation to conform with what the insurer claims to have been intended. Davis v. United Am. Life Ins. Co., 215 Ga. 521, 111 S.E.2d 488 (1959).
A contractor who has bid for the excavation of highway sites on a basis of "unclassified material" may not, under the guise of mistake of fact, seek additional compensation in an action at law because the material excavated contained a higher percentage of rock than it expected, even though its only information at the time of the bid was results of test borings made available to it by the highway department (now Department of Transportation), where it was specifically stipulated that the data were not guaranteed and did not bind the department; where the department furnished all information which it had available, made no attempt to conceal actual conditions, and stipulated the provisional character of its tests, where the contractor had equal opportunity with the department to conduct its own investigation, and where the parties with knowledge of these facts elected to contract on a basis of material moved rather than to contract on a basis of the percentage of dirt and rock after removal. State Hwy. Dep't v. MacDougald Constr. Co., 102 Ga. App. 254, 115 S.E.2d 863 (1960).
Wrong property foreclosed upon.
- Trial court properly reformed security deed and declared that suing lender had first priority over certain tract of land since there was no doubt that parties intended for the tract to have been subject to the security deed alone; trial court also properly directed verdict in favor of suing lender as to its claim for rescission and cancellation of the deed it obtained when it mistakenly foreclosed on the wrong tract, as such relief was the proper remedy. DeGolyer v. Green Tree Servicing, LLC, 291 Ga. App. 444, 662 S.E.2d 141 (2008).
Mistake.
- In a breach of contract action regarding a loan contract between the lender and its debtor, the debtor's failure to cite to facts in the record establishing that the $4,500 note was paid in full led to the conclusion that it was not, and the fact that the debtor might have made payments in excess of $25,000 regarding all the outstanding loans with the lender did not in and of itself prove that the $4,500 loan had been paid off. Jenkins v. Sallie Mae, Inc., 286 Ga. App. 502, 649 S.E.2d 802 (2007).
3. Proof
Equitable relief for unilateral mistake requires evidence of fraud.
- Equity will grant appropriate relief for a mistake of fact by one party, accompanied by fraud on the part of the other, just as in cases where there is mutual mistake. J. Kuniansky, Inc. v. Ware, 192 Ga. 488, 15 S.E.2d 783 (1941).
4. Clerical Error
Error resulting in seven percent discrepancy in amount of bid.
- Contractor was entitled to rescind its construction bid for a church building, after a clerical error resulted in a seven percent discrepancy in the amount of the bid, notwithstanding bidding instructions which prohibited the contractor from withdrawing the bid on the ground of "negligence." First Baptist Church v. Barber Contracting Co., 189 Ga. App. 804, 377 S.E.2d 717 (1989).
RESEARCH REFERENCES
Am. Jur. 2d.
- 27 Am. Jur. 2d, Equity, §§ 33, 35, 39.
C.J.S.- 30 C.J.S., Equity, § 44 et seq.
ALR.
- Rescission of sale of corporate stock on account of mutual mistake due to error in corporate books, 5 A.L.R. 255.
Relief from contract of sale because of mistake as to amount of commodity which it calls for, 31 A.L.R. 384.
Right to reformation of contract or instrument as affected by intervening rights of third persons, 44 A.L.R. 78; 79 A.L.R.2d 1180.
Right to cancellation in equity of an instrument not invalid on its face in which one is named as a party without his consent, 51 A.L.R. 867.
Unilateral mistake as basis of bill in equity to rescind the contract, 59 A.L.R. 809.
Mistaken belief that contract bound one's principal, and not himself personally, as ground for reformation, 71 A.L.R. 1307.
Reformation of memorandum relied upon to take an oral contract out of the statute of frauds, 73 A.L.R. 99.
Right of present claimant of title as against original or intermediate grantor to reformation to correct error in description common to conveyances in chain of title, 89 A.L.R. 1444.
Right of vendor in contract for sale or exchange of real property to bring suit for forfeiture, foreclosure, or rescission, or to quiet title or recover possession, without first giving notice, or making demand for possession, 94 A.L.R. 1239.
Action involving rescission or right to rescind contract and to recover amount paid thereunder as one at law or in equity, 95 A.L.R. 1000.
Jurisdiction of court of law to avoid or reform release of claim for personal injuries on ground of mutual mistake, 96 A.L.R. 1144.
Avoidance on ground of fraud, mistake, duress, or mental incompetency of otherwise validly effected change of beneficiaries of insurance policies, 105 A.L.R. 950.
Assignability of right to rescind or of right to return of money or other property as incident of rescission, 110 A.L.R. 849; 162 A.L.R. 743.
Right of third person entitled to maintain an action at law on a contract between other parties, or to garnish indebtedness thereunder, to maintain a suit for its reformation, 112 A.L.R. 909.
Rescission of contract as affecting right to recover damages for fraud in procuring it, 120 A.L.R. 1154.
Concealment of fact that one of parties to land contract was acting for third person, or misrepresentation as to identity of party for whom he was acting as reason for denying specific performance, or for rescission of contract, 121 A.L.R. 1162.
Right of insurer to reformation of policy or other relief because of its own error, not due to misrepresentation by insured, in computing premiums, indemnity, or other benefits or options under policy, 125 A.L.R. 1058.
Reformation on ground of mutual mistake regarding character or extent of estate or title imported by language used in instrument, 141 A.L.R. 826.
Mistake by one party to contract as to identity of other party who acted in good faith, 147 A.L.R. 1171.
Partial rescission of contract, 148 A.L.R. 417.
Mistake as to existence, practicability of removal, or amount of minerals as ground for relief from mineral lease, 163 A.L.R. 878.
Relief by way of rescission or adjustment of purchase price for mutual mistake as to quantity of land, where the sale is in gross, 1 A.L.R.2d 9.
Mistake, accident, inadvertence, etc., as ground for relief from termination or forfeiture of oil or gas lease for failure to complete well, commence drilling, or pay rental, strictly on time, 5 A.L.R.2d 993.
Venue of action for rescission or cancellation of contract relating to interests in land, 77 A.L.R.2d 1014.
Negligence in executing contract as affecting right to have it reformed, 81 A.L.R.2d 7.
Reformation of property insurance policy to correctly identify the person or interest insured, 25 A.L.R.3d 580.
Right of bank certifying check or note by mistake to cancel, or avoid effect of, certification, 25 A.L.R.3d 1367.
Vendor and purchaser: mutual mistake as to physical condition of realty as ground for rescission, 50 A.L.R.3d 1188.
Reformation of usurious contract, 74 A.L.R.3d 1239.
Requirements for and Confirmations of Bankruptcy Plans for Churches, Dioceses, and Archdioceses Under 11 U.S.C.A. § 1129, 36 A.L.R. Fed. 3d Art. 2.
Determinations Whether Federal Agency Actions Relating to Power Generation Operations Constituted Major Federal Actions for Purposes of § 102(2)(C) of National Environmental Policy Act (NEPA) (42 U.S.C.A. § 4332(2)(C)), 36 A.L.R. Fed. 3d Art. 3.
Federal Contractor's Right to Equitable Adjustment for Differing or Changed Site Conditions, 36 A.L.R. Fed. 3d Art. 7.