Reform Contract To Correct Mutual Mistake
Even a Clear and Unambiguous Contractual Term
Can Sometimes Be Avoided
By: Ian T. Kravitz, Esquire
So you negotiate the agreement you want, and then a term is slipped into the agreement that you fail to see before signing. Usually, you are bound by the agreement you execute and are presumed to have read it completely. Generally you will find yourself stuck to perform even where you had not agreed to do so except for your signature on the agreement. There is a possibility that would allow you to avoid such an obligation, even where the agreement provides that the agreement may not be changed except through a subsequent written agreement between the parties.
In American Federation of State, County v. Miami-Dade County Public Schools, 2012 WL 3101617, the parties had negotiated collective bargaining agreement (“CBA”) to resolve differences between Miami-Dade County Public Schools (“the Schools”) and American Federation of State, County (“the Union”). Negotiations were detailed, and all parties agreed on all material terms to be included within the CBA. The CBA was clear that any modifications to the CBA were strictly required to be in writing and executed by the parties.
After execution of the CBA, the Schools refused to comply with the salary schedules for the Union employees as set forth in the CBA. The Schools asserted that those salary schedules attached to the CBA listed salaries above what was actually agreed to by the parties. The Schools initiated arbitration to resolve the dispute. The Union defended by relying on the CBA and the undisputed facts that the salary schedules attached to the CBA were attached to the CBA when it was executed, and that the arbitrator was without the ability to modify the CBA as a result of the CBA provision precluding any such modifications unless in writing an executed by the parties.
The arbitrator found that although the Schools had prepared the mistaken documents, and although any ambiguities in an agreement are to be construed against the drafting party, that the Union knew or should have known that the attached salary schedules were not the salaries that had actually been agreed to. The arbitrator therefore entered an award reforming the CBA to reflect the salary schedules that the Schools argued were the actual agreed upon salary schedules. The Union brought an action in Circuit Court challenging that award. The trial court vacated the arbitration award by finding that the arbitrator exceeded the scope of his authority by modifying the CBA. An appeal followed.
On appeal, Florida’s Third District Court of Appeal overturned the trial court’s decision, and affirmed the arbitration award in favor of the Schools. The appellate court based its ruling on the distinction between a modification and a reformation. The appellate court explained that what the arbitrator did was to reform the CBA, and not to modify it. The appellate court held that where there is a mutual mistake resulting in a written document, which was different from what the parties had actually agreed upon, the agreement may be reformed to reflect the true intent of the parites.
The appellate court stated that such a reformation is not the same as a modification since there is no change to the actual agreement between the parties. Instead, the reformation is simply to correct an error in the written document to reflect the actual agreement between the parties. The appellate court even went so far as to argue that failing to reform the CBA would in fact be a modification of the agreement, as the true agreement between the parties was for terms different than what was expressed in the written document.
The moral of the story is that although a written document is usually binding on the parties whether or not it reflects their true intent or understanding, when the written document differs from terms that both parties believed to be the actual agreed upon terms, it is the actual agreement between the parties that binds, and a differing written agreement may be reformed to accurately reflect the true agreement between the parties.