In accordance with underlying equitable principles, restitution is granted where a mistake has been made by one or both parties to a transaction or series of transactions because of which one of them has obtained an advantage which it would be unjust for him to retain.
There are two forms of relief, one based upon rescission, the other upon reformation. The first seeks the undoing of a transaction and the replacing of the parties into the positions, as nearly as may be, originally occupied. On the other hand, reformation seeks the performance of an agreement as the parties to it had intended. For rescission there may have been no contract, as where a payment is made to one who is not a creditor. Reformation, however, can be granted only where the parties had reached an agreement. Thus where there is a misunderstanding between the parties because of an ambiguity of language for which neither was at fault, there can be rescission of the attempted transaction but no reformation, since no agreement was made. If, however, there was an agreement as to what the parties intended but a mistake was made in the documents which implemented it, reformation will be granted to accord with the original agreement. In both cases restitution will follow to the extent necessary to avoid the consequences of the mistake. In either case the relief may be granted in proceedings in equity to reform a deed, or to recover the consideration paid in a fraudulently induced contract, or by an action to recover at law an overpayment made because of a misinterpretation of the terms of the agreement. In the absence of fraud, and sometimes even where there is fraud, a litigant whose claim can be satisfied by the payment of money may be able to get redress only in a law court. For reformation to a previous agreement it is immaterial whether the mistake is unilateral or was made by both parties and whether the mistake was of law or fact. For rescission, a mistake by only one of the parties may not be sufficient and the fact that the mistake was of law is sometimes fatal.
Edward S. Thurston,
RECENT DEVELOPMENTS IN RESTITUTION: RESCISSION AND REFORMATION FOR MISTAKE, INCLUDING MISREPRESENTATION,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol46/iss8/3