Bar Exam (Next Generation) Quiz: Reformation

12 questions · exam conditions

0:00

ReformationQuestion 1 of 12

Section 9 of the State Reformation Act provides: "Reformation of an instrument is effective from the time of the instrument's original execution. However, a reformed instrument is not effective against a subsequent purchaser or encumbrancer who acquired an interest in the property for value and without notice of the mistake, or against a person claiming through such a purchaser or encumbrancer."

Owen and Alice signed a contract for the sale of Lot 1. Because of a scrivener's error, the deed described Lot 2, and neither Owen nor Alice noticed. Alice recorded the deed. She then borrowed money from Bank, giving Bank a mortgage on Lot 2. Bank's loan officer did not know of the mistake; a title search showed Alice as the record owner of Lot 2 and revealed no exceptions. Owen later discovered the error and sued to reform the deed to describe Lot 1 and to cancel Bank's mortgage. Under Section 9, what is the result as to Bank's mortgage?

Bank, because it is an encumbrancer for value without notice of the mistake and the statute protects its interest.

Owen, because Alice had no title to Lot 2 and the recorded deed gave Bank constructive notice that the property was subject to reformation.

Owen, because reformation relates back to the original deed, so Bank never acquired an interest in Lot 2.

Bank, but only if the loan proceeds were used to purchase the property or improve Lot 2.

← Back to quizzes

Bar Exam (Next Generation) Quiz

Bar Exam (Next Generation) Quiz: Reformation

Practice Reformation in Bar Exam (Next Generation) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Reformation, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Next Generation).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Bank, because it is an encumbrancer for value without notice of the mistake and the statute protects its interest. (correct answer)
Owen, because Alice had no title to Lot 2 and the recorded deed gave Bank constructive notice that the property was subject to reformation.
Owen, because reformation relates back to the original deed, so Bank never acquired an interest in Lot 2.
Bank, but only if the loan proceeds were used to purchase the property or improve Lot 2.

Explanation: Whenever you see reformation of a deed plus a later mortgage, think about the bona fide purchaser/encumbrancer exception: even though reformation "relates back" to the original execution, a later-for-value interest holder without notice is protected. That is exactly what Section 9 provides. Here, Bank is an encumbrancer: Alice gave Bank a mortgage on Lot 2 after recording the deed. Bank loaned money for value, and its title search showed Alice as record owner with no exceptions, so it had no notice of the scrivener's error. Therefore, under the statute, the reformed deed is not effective against Bank's mortgage. Owen cannot cancel it. The "'Owen, because Alice had no title to Lot 2 and the recorded deed gave Bank constructive notice"' theory fails on both points: a mistaken deed can still give record title that can be reformed, and the deed's description of Lot 2 did not reveal the mistake—it just showed what appeared to be a valid conveyance. The "'reformation relates back, so Bank never acquired an interest"' argument confuses the general relation-back doctrine with the statute's explicit BFP exception; that exception prevents relation back from defeating Bank. The "'Bank, but only if the loan proceeds were used to purchase or improve Lot 2"' adds a requirement the statute does not contain: for value means the mortgage was given in exchange for loan funds, not that those funds had to be used on the property. Study tip: On reformed-instrument questions, first identify whether the later claimant paid value and lacked notice; if yes, the statute protects them regardless of the original mistake or relation-back doctrine.

Question 2

Two owners of a distribution business signed a settlement agreement that resolved their dispute over profits. The agreement set out a payment schedule and a release of all claims arising from the business relationship. One owner later claimed that the parties had also agreed that the other owner would transfer his 20% interest in a separate trademark, but no such term appeared in the writing. The other owner denied making any such agreement. The first owner asked the court to add a provision requiring the transfer.

Which issue is most likely dispositive?

Whether the written settlement agreement contains an integration clause.
Whether the parties actually agreed to the trademark transfer when they settled. (correct answer)
Whether the omission was caused by the drafting party's negligence.
Whether the first owner reasonably relied on the alleged promise.

Explanation: When you see a settlement agreement with a missing term, your instinct might be to jump straight to the parol evidence rule. But before that rule can even apply, you must ask a more fundamental question: did the parties actually reach an agreement on that missing term? The parol evidence rule only excludes evidence of prior or contemporaneous agreements that add to a fully integrated writing—but it doesn't create terms that were never mutually assented to in the first place. Here, the first owner claims a trademark transfer was part of the deal, while the other owner denies it. This is a pure factual dispute over mutual assent. If they never actually agreed to the transfer, the claim fails outright. If they did agree but the term was omitted, only then would you examine whether the writing is integrated and whether the term is collateral or subject to reformation for mistake. The existence of the agreement is the threshold issue, making it dispositive. The distractor regarding the integration clause is premature—that clause only bars evidence of existing prior agreements, but it doesn't resolve whether a separate, later-negotiated term was part of the same settlement. The drafting party's negligence is irrelevant because reformation requires mutual mistake, fraud, or unconscionable conduct, not simple carelessness. Finally, reasonable reliance points toward promissory estoppel, which is an equitable substitute for consideration, but here we have a written settlement contract—reliance doesn't help you add a term to an existing contract. Study tip: On the bar exam, always ask "Was there mutual assent?" before asking "Is the parol evidence rule a bar?" The rule excludes evidence of terms already agreed to, but it cannot invent terms the parties never agreed to.

Question 3

A seller and a buyer negotiated the sale of a warehouse. They orally agreed that the seller would spend $40,000 on roof repairs before closing. When the final contract was typed from a standard form by the seller's attorney, the roof-repair obligation was inadvertently omitted. The written contract contained an integration clause. Neither party noticed the omission until after signing. The buyer later asked the court to add a term requiring the roof repairs.

Which issue is most likely dispositive in the buyer's action?

Whether the integration clause bars proof of the oral roof-repair agreement.
Whether the omission of the roof-repair term was a mistake in integrating the parties' actual agreement. (correct answer)
Whether the seller's oral promise to repair is unenforceable for lack of new consideration.
Whether the buyer's failure to notice the omission before signing precludes relief.

Explanation: Whenever you see an integration clause paired with an omitted oral term, think parol evidence — but also its exceptions. The parol evidence rule bars proof of prior or contemporaneous oral agreements that contradict a final written contract, but it does not bar evidence offered to show that the written contract never actually embodied the parties' agreement because of a drafting mistake. Here, the dispositive threshold issue is whether the omission was a mistake in integrating their actual agreement. If the buyer can show by clear and convincing evidence that both parties had agreed that the seller would spend $40,000 on roof repairs and that the seller's attorney inadvertently dropped the term, a court may reform the contract to add it—even though an integration clause is present. The integration clause alone does not bar this relief, because such a clause establishes thatuthe writing is intended as final, but it cannot protect a writing that fails, due to mistake, to reflect the deal actually made. Likewise, English seller's oral promise is not unenforceable for lack of new consideration: that promise was part of the original bargain, not a later modification, so it was supported by the buyer's mutual promises in the same agreement. And the buyer's failure to notice the omission before signing is not automatically dispositive: while carelessness in signing might matter in some cases, mutual mistake in integration can still be corrected, especially when neither party knew of the omission. The decisive question is not whether the buyer read every line, but whether the omission was a mistake in reducing their actual agreement to writing. Keep this pattern in mind: when a party uses parol evidence to attack the contract itself as a mistaken transcription, the integration clause is not a dead end—it just raises a question about what was actually integrated.

Question 4

A seller agreed to sell a catering business. During negotiations, the parties agreed the price would be $300,000, based on the business's annual revenue of $150,000. When the typed final agreement was prepared, the seller's lawyer mistakenly inserted annual revenue of $15,000 and price of $30,000. The buyer noticed the error before signing but said nothing and immediately signed. When the seller later discovered the error, the buyer insisted the contract price was $30,000. The seller sued to correct the agreement.

Which fact is most important in determining whether the seller is entitled to have the agreement corrected?

The buyer got an unusually favorable price because of the mistake.
The seller's lawyer prepared the final agreement and made the typographical error.
The contract's written price term is clear and unambiguous.
The buyer noticed the incorrect price before signing and chose not to mention it. (correct answer)

Explanation: When you see a reformation-of-contract question, focus on whether the mistake was mutual or one-sided, and on what the other party knew. Reformation usually corrects a writing that does not reflect the parties' actual agreement. Here, both sides orally agreed to $300,000, but the written contract typed $30,000. The decisive fact is that the buyer noticed the incorrect price before signing and chose not to mention it. That silence matters because the seller's mistake was no longer purely unilateral: the buyer knew the writing did not reflect the agreed price and sat silent to take advantage. A court may reform the contract because enforcing it would countenance inequitable conduct. The unusually favorable price alone would not be enough; a favorable price might be a mere windfall, and courts do not rewrite contracts simply because one side got a good deal. The fact that the seller's lawyer prepared the final agreement and made the typographical error explains how the mistake happened, but the drafter's negligence does not by itself entitle the seller to correction. A clear and unambiguous written price term is also not the obstacle; reformation exists precisely to correct clear written terms when they are tainted by fraud, mutual mistake, or knowing silence. So in future contract-mistake questions, look for what the non-mistaken party knew before signing. That knowledge is the key that unlocks reformation.

Question 5

A buyer agreed to buy a restaurant for $400,000 after the seller told him thatthe restaurant's annual gross revenue was $600,000. The signed contract accurately recited the $400,000 price and listed the included assets. After closing,ethe buyer learned actual annual revenue was $380,000 and sued to have the price reduced to $380,000, arguing thatthe contract should be reformed because his consent was induced by the seller's misrepresentation.

Which issue is most likely dispositivein evaluating the buyer's reformation claim?

Whetherthe written contract accurately reflects the price the parties actually agreed to at signing. (correct answer)
Whetherthe seller's revenue statement was a misrepresentation of an existing fact.
Whetherthe buyer's only remedy is rescission for fraudulent misrepresentation.
Whetherthe buyer discovered the actual revenue before closing.

Explanation: Whenever you see a reformation claim, think of it as a correction tool, not a do-over for a bad bargain. Reformation asks: does the written contract match the agreement the parties actually reached? If yes, there is nothing to reform. Here, the contract accurately recited the $400,000 price and listed included assets. The buyer's real grievance is that he was induced to agree to that price by a false revenue statement. That is a fraudulent-misrepresentation problem, not a reformation problem. So the most dispositive issue is whether the written contract accurately reflects the price the parties actually agreed to at signing — it did, so reformation fails. The seller's revenue statement being a misrepresentation of existing fact could support a fraud claim, but it does not make the contract fail to reflect the parties' agreement. Similarly, saying the buyer's only remedy is rescission is too narrow: damages for fraudulent misrepresentation are generally available, and rescission is not the only alternative anyway. Finally, whether the buyer discovered the actual revenue before closing might affect a fraud or diligence argument, but it does not address the core reformation requirement — a mismatch between the writing and the actual agreement. Study tip: when a question asks about reformation, first ask, "What did the parties actually agree to, and does the writing say that?" If the writing matches, reformation is off the table; examine fraud, rescission, or damages instead.

Question 6

Section 16 of the State Consumer Contract Act provides: "A written agreement may be reformed if, because of a fraudulent misrepresentation by one party as to the contents or legal effect of the writing, the other party signed without knowing that the writing did not contain the agreed terms. The party seeking reformation must show that the misrepresentation induced the signing and that it was reasonable to rely on it."

Customer and Dealer negotiated the sale of a car with a 3-year/36,000-mile warranty. At signing, Dealer pointed to a dense paragraph and told Customer, "This is the 3-year warranty we discussed." In fact, the paragraph was a 1-year warranty. Customer did not read the paragraph and signed. When the car's transmission failed at 2 years, Dealer refused to cover it, citing the 1-year warranty. Customer seeks reformation to a 3-year warranty. Under Section 16, should the court reform the contract?

No, because Customer failed to read the warranty paragraph and is bound by the terms of the signed writing.
No, because reformation is available only for mutual mistake, and Dealer did not share Customer's mistake.
Yes, because Dealer fraudulently misrepresented the contents of the writing and Customer reasonably relied on the misrepresentation. (correct answer)
Yes, because the parol evidence rule does not apply to consumer contracts, so Customer may prove the prior oral warranty.

Explanation: Whenever you see a reformation question, focus on what the statute or doctrine requires. Here, Section 16 expressly allows reformation when one party fraudulently misrepresents the contents or legal effect of a writing, the other party signs without knowing it lacks the agreed terms, and reliance was reasonable. Dealer's statement that the dense paragraph was "the 3-year warranty we discussed" was a fraudulent misrepresentation of the writing's contents. Customer relied on that assurance rather than reading the paragraph, which was reasonable given Dealer's explicit confirmation. So reformation is appropriate. The "failure to read" choice misses the point: while a party is generally bound by a signed writing, fraud in the inducement about the writing's contents is a recognized exception, and Section 16 is designed for exactly this situation. The "mutual mistake only" choice is also wrong; Section 16 covers one party's fraudulent misrepresentation, not just shared mistake. Finally, the "parol evidence rule does not apply to consumer contracts" choice is doubly flawed: the parol evidence rule is not categorically eliminated for consumers, and even where it applies, it does not bar evidence of fraud when reformation is sought. Your study tip: when a statute supplies the standard, apply its elements precisely. Here the key pattern is "fraudulent misrepresentation about the writing + reasonable reliance = reformation," even if the signer never read the document.

Question 7

In Hargrove v. Lyle, the state supreme court held: "A party seeking reformation of a written agreement for mutual mistake must show that he exercised reasonable care in reading and verifying the writing before signing. A failure to read the writing is not a bar if the other party knew or had reason to know of the mistake."

Owner and Contractor agreed that Contractor would install "Grade 50 steel beams" in a warehouse. Owner's attorney prepared the final written contract but inadvertently omitted the words "Grade 50 steel beams." Owner signed the final draft without reading it; Contractor also signed without noticing the omission. Both parties intended the contract to include the specification. When Owner later discovered the omission, he sought reformation to add the specification. Under Hargrove, should the court reform the contract?

Yes, because both parties intended the contract to include Grade 50 steel beams and the omission was a mutual mistake that materially affects the agreed exchange.
No, because Owner failed to exercise reasonable care in reading and verifying the writing, and Contractor neither knew nor had reason to know of the mistake. (correct answer)
No, because the parol evidence rule bars evidence of the prior oral agreement to use Grade 50 steel beams once the written contract was signed.
Yes, because Owner's attorney prepared the writing and had a duty to verify it, so Owner's failure to read the final draft is excused.

Explanation: Whenever you see a reformation question, the core issue isn't just whether both parties were mistaken—it's whether the party asking for help exercised reasonable care before signing. Under Hargrove, mutual mistake alone does not guarantee reformation; the party seeking it must show due diligence in reading and verifying the writing, unless the other party knew or had reason to know of the mistake. Here, both parties intended Grade 50 steel beams, and the omission was genuinely mutual and material. But Owner signed without reading, and the record shows Contractor neither knew nor had reason to know of the omission. Therefore, Owner fails Hargrove's reasonable-care requirement, and the court should not reform the contract. The choice saying "Yes, because both parties intended" is tempting but incomplete—it ignores the negligence inquiry. The parol evidence rule does not block reformation for mutual mistake; the rule yields when a writing fails to reflect the parties' actual agreement. And the claim that Owner's attorney's preparation excuses Owner's failure to read is wrong: the attorney's role does not transfer Owner's duty of reasonable care, and there is no basis to bind Contractor to the attorney's oversight. For the exam: when you see reformation, check two things—mutual mistake and the innocent party's care. A party who signs without reading may lose relief unless the other side knew or should have known.

Question 8

A manufacturer and a distributor signed a contract granting the distributor exclusive rights to sell the manufacturer's goods in 'the Territory.' The contract defined 'Territory' as New York, New Jersey,and Connecticut. The distributor later claimed that during negotiations,ethe parties orally agreed the Territory would include all six New England states,but thatthe final contract's definition was drafted too narrowly.The manufacturer maintained the written definition was accurate. The distributor askedthe court to reform the contract to define Territory as all New England.

Which issue is most important?

Whetherthe distributor accepted the written definition by signing the contract.
Whetherthe term 'Territory' is ambiguous and should be interpreted against the manufacturer as drafter.
Whetherthe written definition can be reformed because of a mistake in reducing the parties' agreement to writing. (correct answer)
Whetherthe parol evidence rule bars evidence of the earlier oral negotiations.

Explanation: When you see a signed contract followed by a claim that it doesn't match what the parties actually agreed, your first question should be about reformation: an equitable remedy that rewrites a written contract to reflect the parties' true agreement. The dispute here is not about what the words mean; it is about whether the writing itself is wrong because it was drafted too narrowly during reduction to writing. That is why the most important issue is whether the written definition can be reformed because of a mistake in reducing the parties' agreement to writing. A claim of mutual mistake in drafting is the classic gate for reformation. The other choices miss this central point. The fact that the distributor signed the written definition does not end the matter: reformation exists precisely because signing does not always bar a party from showing the writing failed to capture the agreement. Likewise, whether "Territory" is ambiguous and should be interpreted against the manufacturer as drafter is a contract-interpretation tool that applies only when the language is unclear after considering extrinsic evidence—but this claim is that the language is too clear and wrong, not ambiguous. Finally, the parol evidence rule generally bars prior oral negotiations that contradict an integrated written contract, but it has a key exception: evidence is admissible to prove a mistake in reducing the agreement to writing so that reformation can be granted. So reformation, not the parol evidence rule, is the real issue. Study tip: on bar-exam contracts questions, distinguish interpretation from reformation. Interpretation asks what the written words mean; reformation asks whether the written words should be changed because they don't reflect the agreement. When you see "oral negotiations" plus "final contract too narrow," look for the mistake-in-integration exception.

Question 9

Section 5 of the State Reformation Act provides: "A court may reform a written agreement to conform to the agreement the parties actually made if the writing, through mutual mistake, fails to express that agreement. A mutual mistake is a mistake shared by both parties as to a fact existing at the time the agreement was made that is a basic assumption of the agreement and materially affects the agreed exchange."

Seller and Buyer negotiated the sale of "Parcel A" as a specific parcel, not on a per-acre basis. Before signing, Seller told Buyer, "I have never had Parcel A surveyed; the county map says it is 10 acres, but it may be off." Buyer replied, "That is fine; we are both relying on the map." The written contract stated: "Seller conveys Parcel A, containing 10 acres, for $100,000." A later survey showed Parcel A contains 7 acres. Buyer asked the court to reform the contract to state "containing 7 acres." Should the court grant reformation?

Yes, because both parties shared a mistake as to a basic assumption and the mistake materially affects the exchange.
Yes, because the parties' statements show they intended the contract to reflect the true acreage, so the writing should be corrected to avoid unjust enrichment.
No, because the contract is unambiguous and the parol evidence rule bars evidence that "10 acres" was a mistake.
No, because the writing accurately expressed the agreement the parties actually made; the mistake went to an underlying assumption about the land, not to the writing's expression of the agreement. (correct answer)

Explanation: Whenever you see a reformation question, separate two things: the agreement the parties actually made and the writing that supposedly records it. Reformation fixes a writing that, through mutual mistake, fails to express that agreement. Here the parties actually agreed to sell and buy Parcel A as a specific parcel for $100,000—not on a per-acre basis. Seller warned that the county map's "10 acres" might be off, Buyer accepted that risk, and the contract used that map description. So the writing accurately expressed their deal: sell this parcel, with a potentially inaccurate acreage estimate. The later discovery that the parcel is 7 acres is a mistake about an underlying assumption concerning the land, not a mistake in expressing the agreement itself. The first yes answer misses this distinction: a mutual mistake can affect the exchange, but reformation still requires the writing to fail to express the actual agreement. The second yes answer overreads the parties' statements—they intended to rely on the map, not to guarantee true acreage, so no "true acreage" term needs correcting. The parol evidence answer is also wrong because reformation claims are an exception to the parol evidence rule; extrinsic evidence is admissible to prove a scrivener's error. The correct insight is that no scrivener's error occurred. Your study tip: on reformation questions, ask first, "What was the actual bargain?" If the writing matches that bargain, stop—reformation is unavailable even if both parties were mistaken about a fact underneath the deal.

Question 10

Section 12 of the State Reformation Act provides: "A court may reform a written agreement if one party made a mistake in reducing the agreement to writing and the other party knew or had reason to know of the mistake and did not disclose it before execution."

Landlord and Tenant agreed that the monthly rent for a commercial lease would be $3,000. Landlord's attorney, in drafting the lease, typed "$ 2,000." The lease contained an integration clause stating that the writing is the complete agreement of the parties. Tenant read the lease, realized the rent was $2,000, said nothing, and signed. Landlord signed without noticing the error. Landlord later sought reformation to increase the rent to $3,000. Under Section 12, should the court reform the lease?

Yes, because Tenant knew or had reason to know of the mistake and failed to disclose it before execution. (correct answer)
No, because Landlord had an opportunity to read the lease and is bound by the terms he signed.
No, because reformation requires a mutual mistake, and Tenant made no mistake.
Yes, because the prior oral agreement for $3,000 was a complete contract, making the later written lease unenforceable.

Explanation: Whenever you see a statutory rule for reformation, the statute itself dictates the elements, even if it diverges from common law. Here, Section 12 creates an exception to the traditional mutual-mistake requirement: a party can obtain reformation if the other party knew or had reason to know of the drafting mistake and stayed silent. Landlord's attorney mistakenly wrote $2,000, Tenant read it, recognized the error, said nothing, and signed. That matches the statute's trigger perfectly, so the court should reform the lease to $3,000. The choice stating "No, because Landlord had an opportunity to read the lease and is bound by the terms he signed" reflects the general rule that a party is bound by a contract they sign, but it ignores the specific statutory override that addresses known unilateral mistakes. The choice claiming reformation requires a mutual mistake is the classic common-law trap, but this statute explicitly allows reformation for a unilateral mistake when the non-mistaken party had knowledge. Finally, the option that the prior oral agreement was a complete contract making the written lease unenforceable misapplies integration; the integration clause merges the prior agreement into the writing, and reformation is the equitable remedy to fix the writing itself, not to enforce the oral contract separately. For strategy, when a question quotes a statute, apply its exact language first—look for the "knew or had reason to know" hook, and remember that statutory exceptions can override ordinary negligence rules like the duty to read.

Question 11

A software company and a customer negotiated a license agreement. The parties never discussed indemnification. While preparing the final draft,ethe software company's paralegal accidentally included an indemnification clause from an earlier template. Neither party noticed the clause before signing. After a third party suedthe customer,ethe customer demanded thatthe software company indemnify it. The software company askedthe court to remove the clause.

Which remedy is most likely available?

Specific performance of the license agreement as written, including the indemnification clause.
Rescission of the entire license agreement because of the unilateral mistake.
Reformation to delete the indemnification clause because its inclusion was a mistake in integratingthe parties' agreement. (correct answer)
Reformation to add a clause limiting indemnification to claims arising from the software company's own negligence.

Explanation: A question about a stray clause accidentally inserted into a contract tests your understanding of equitable remedies, specifically reformation. Reformation corrects a writing that fails to reflect the parties' true agreement—a mistake in integration. Here, the parties never negotiated indemnification, so the paralegal's template error is a classic scrivener's mistake. The correct answer, Reformation to delete the indemnification clause, is proper because the writing does not mirror the actual terms agreed upon. Why are the others wrong? Specific performance of the license agreement as written would enforce a term the parties never agreed to, converting a clerical error into a binding obligation—that defeats the purpose of equitable relief. Rescission of the entire license agreement is disproportionate; the mistake is isolated to a single clause, and rescission is reserved for fundamental mistakes that vitiate the core of the bargain, not a drafting slip. Reformation to add a clause limiting indemnification to the software company's own negligence is also flawed—reformation cannot invent new terms; it can only delete or alter language to match the parties' prior oral or implied agreement. Since no indemnification term was ever discussed, there is nothing to "limit." Study tip: When you see a contract with an obviously erroneous term, ask whether the mistake is in the "integration" (the writing) or in the "formation" (the agreement). The former calls for reformation; the latter may call for rescission. Look for the scrivener's error pattern.

Question 12

In Parkview v. Sato, the state supreme court stated: "Reformation is an equitable remedy. A party may obtain reformation when the parties reached a complete agreement and the writing, because of a mutual mistake, does not express that agreement. The remedy may nevertheless be denied when the party opposing reformation has so changed position in reliance on the writing that the court cannot restore the parties to their former positions. The focus is on the feasibility of restoration, not on whether the opposing party will profit from the mistake."

Seller and Buyer entered a contract for the sale of a restaurant. Both parties intended a 2-year noncompetition covenant, but the typed contract contained a 5-year covenant because of a typographical error. After closing, Buyer used the restaurant as collateral for a loan to expand, and the lender expressly relied on the 5-year covenant as protecting the restaurant's goodwill. Seller later sought reformation to reduce the covenant to 2 years. Buyer showed that if the covenant is shortened, the lender will call the loan and Buyer will lose the restaurant, and that the restaurant has been extensively remodeled. Seller offered to pay the cost of the remodeling. Under Parkview, what is the likely result?

Reformation granted, because the mutual mistake is clear and Seller's offer to pay for the remodeling restores Buyer to its former position.
Reformation denied, because Buyer changed position in reliance on the written 5-year covenant and the parties cannot be restored to their former positions. (correct answer)
Reformation denied, because the 5-year covenant was the bargained-for exchange and Seller must bear the consequence of the typographical error.
Reformation granted, because the noncompetition covenant is a personal obligation of Seller, and the lender's reliance on the longer covenant is not a change in Buyer's position.

Explanation: Whenever you see reformation based on mutual mistake, remember it is an equitable remedy: the party must show that the writing, because of a mutual mistake, fails to express the parties' completed agreement, but reformation may still be denied if the opposing party has changed position in reliance on the writing and the parties cannot be restored to their former positions. The Parkview focus is on feasibility of restoration, not on whether the opposing party profits. Here both parties intended a 2-year covenant, so the typed 5-year term was a mutual typographical error. The first requirement is met. But Buyer then used the restaurant as collateral for a loan, andthe lender expressly relied on the 5-year covenant to protect goodwill. If the covenant is shortened, the lender will call the loan and Buyer will lose the restaurant; Buyer also remodeled extensively. Seller's offer to pay remodeling costs does not suffice:it restores the physical property, but not Buyer's financing position and exposure to lose the restaurant. Because restoration is infeasible, reformation denied. The answer stating reformation granted because the mutual mistake is clear and Seller's offer pays for remodeling misses that clear mutual mistake is necessary, not sufficient; equitable defense applies. The answer stating reformation denied because the 5-year covenant was the bargained-for exchange misunderstands the facts—both sides intended 2 years, so the 5-year term was not bargained-for; it was a mutual mistake. The answer stating reformation granted because the covenant is Seller's personal obligation and lender reliance is not a change in Buyer's position is wrong:third-party reliance can make restoration infeasible, and here Buyer's position is directly affected—the loan would be called andthe restaurant lost. On reformation questions, after finding mutual mistake, immediately ask whether the opposing party relied on the writing and whether the court can restore the status quo. Third-party reliance often tips the scales toward denial.