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What is rescission in a breach of contract claim?

On Behalf of | Oct 4, 2023 | BUSINESS & COMMERCIAL LAW - Contract Disputes

Sometimes, you realize shortly after the ink is dry on a contract that you’ve made a big mistake. What happens then?

Rescission is an equitable remedy designed to address situations where it would be unfair or unjust to enforce a contract as originally agreed.

What are the grounds for rescission?

When a contract is rescinded, it’s as if the contract never existed, and both parties are released from their obligations under the contract. Rescission is typically used in situations where there are fundamental flaws or problems with the contract itself. Grounds for rescission include:

  • Mistake: Rescission can be pursued if there was a mutual mistake made by both parties at the time of contract formation. This mistake could be related to the subject matter of the contract, the terms, or other critical elements.
  • Fraud or misrepresentation: If one party induced the other into the contract through fraudulent or false statements, misrepresentations, or concealment of material facts, the injured party may seek rescission.
  • Lack of capacity: Rescission may be appropriate if one of the parties lacked the legal capacity to make the contract, such as a minor or someone mentally incapacitated.
    Illegality: If the contract has anything to do with illegal activity or violates public policy, that can make it subject to rescission.
  • Mutual agreement: If both parties agree to rescind, there’s no need to involve the court and it can be done voluntarily.

It’s a way to rectify fundamental flaws or injustices in a contract rather than seeking damages or specific performance. Understanding more about the options in a contract case can help you find a way forward if you have a contract dispute.