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Court orders reformation of settlement agreement where attorney should have notified opposing counsel of drafting error

1/29/26

By: Jessica Gray Kelly and Anna G. Nilles

A recent Massachusetts Superior Court decision provides a cautionary tale for attorneys: you cannot take advantage of a drafting mistake by the opposing party.

In Cahoon Capital Strategic Income Fund, LLC v. Ross, et al., the Suffolk County Superior Court conducted a two-day bench trial to decide whether a prior settlement agreement between the parties should be reformed to include mutual releases.  The court ordered reformation on the grounds of the unilateral mistake of one party, which was known to the other party. 

The litigation arose from a dispute between business partners who accused each other of competing against their shared enterprise.   After unsuccessful attempts to resolve their differences, the parties finally agreed to settlement terms, which included mutual releases of all claims.  After several rounds of revisions, however, the finalized agreement contained a one-sided release.  The disadvantaged party and his attorney did not notice the error.  Counsel for the other party noticed and mentioned the error to his client, but not to the other side, gradually adopting the view that the one-sided release might have been intentional.  During subsequent litigation between the parties, the disadvantaged party realized the mistake and sought to reform the contract to include a mutual release that would reflect the parties’ initial understanding.

The court noted the “exceptional” nature of reformation and found that the evidence here satisfied the high standard of proof.  The court also recognized the tension between an attorney having an obligation to point out his opposing counsel’s mistakes, even if doing so was not in the best interests of his client.  Relying on Massachusetts precedent and a 1986 ABA ethics opinion, however, the court ruled that the attorney had an ethical obligation to alert opposing counsel to her oversight.  Arguments against reformation, despite their “facial appeal,” did not persuade the court.  Negligence, carelessness, and the sophistication of clients and attorneys in this case did not foreclose the equitable remedy of reformation.   

The Cahoon decision not only reminds attorneys of the importance of carefully drafting and reviewing agreements, but also that you cannot just ignore a drafting mistake by your opposing counsel.  Attorneys have an affirmative obligation to notify opposing counsel of drafting errors, even if the error could favor your client.

For more information please contact Jessica Gray Kelly at jessica.kelly@fmglaw.com, Anna G. Nilles at anna.nilles@fmglaw.com or your local FMG attorney.

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