Rescission

Filed Under: Contract Law; Remedies

An equitable remedy that annuls or avoids a contract. Rescission is a remedy granted to a plaintiff in the case of fraud, innocent misrepresentation, or because of some other action on the defendant’s behalf that amounts to undue influence, unconscionability, or makes the bargain questionable on some other equitable grounds. Rescission in equity operates to roll the contract back to the position the parties were in prior to contracting. This is referred to as rescission ab initio, or “from the beginning.” It is to be distinguished from rescission de futuro, or “for the future.” The latter terminology is unwisely used to describe the position of a plaintiff who is entitled to terminate a contract for breach. As an equitable remedy rescission is subject to a number of discretionary barriers including delay and affirmation. It is also important for the plaintiff to be able to effect restitutio in integrium. That requires both parties to be restored to their pre-contractual positions. The degree of complete restoration will vary depending on the particular underlying cause of action. In the case of fraud a court will be less particular with giving complete restoration, whereas for an innocent misrepresentation, anything less that complete restoration will bar rescission.

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