Legal Definitions - equitable rescission

Equitable rescission is a legal remedy where a court cancels or "undoes" a contract, treating it as if it never existed. The term "equitable" signifies that the court grants this remedy based on principles of fairness and justice, typically when monetary compensation alone would not adequately resolve the harm. It aims to restore the parties to their original positions before the contract was formed, often due to issues like fraud, significant mistake, or undue influence.

Here are some examples illustrating equitable rescission:

• Example 1: Misrepresentation in a Property Sale

  A couple purchases a rural property after the seller explicitly assures them that the land is suitable for building a permanent residence and has access to municipal water. After the sale is finalized, the buyers discover that the property is located in a protected wetland area where construction is prohibited, and the only water source is a private well, not municipal lines, requiring significant investment to ensure potability.

  Explanation: In this scenario, the court might grant equitable rescission because the seller's material misrepresentations about crucial aspects of the property induced the buyers into the contract. Simply awarding money for the well or potential fines might not fully address the buyers' desire for a buildable property with municipal water. Undoing the contract and returning the property to the seller, and the purchase price to the buyers, restores both parties to their original positions before the deceptive sale.

• Example 2: Undue Influence on a Vulnerable Individual

  An elderly widow, recently widowed and suffering from early-stage dementia, is persuaded by a new acquaintance to sign a contract selling her valuable antique furniture collection for a fraction of its market value. The acquaintance had been isolating her from her family and caregivers, and pressuring her daily to sign the agreement.

  Explanation: A court could order equitable rescission in this situation. The contract was formed under undue influence, meaning the widow's free will was compromised due to her vulnerability and the acquaintance's manipulative tactics. Monetary damages would not fully rectify the injustice; instead, undoing the contract and returning the antique collection ensures fairness and protects vulnerable individuals from exploitation, restoring the widow to her pre-contractual state.

• Example 3: Mutual Mistake Regarding a Unique Item

  Two collectors enter into a contract for the purchase and sale of a rare historical document, both believing it to be an original signed by a famous historical figure. They agree on a price reflecting its perceived authenticity and historical significance. Later, after the sale, forensic analysis conclusively proves the document is a highly skilled forgery, not an original.

  Explanation: In this case, both parties made a fundamental mistake about the core subject matter of the contract – the authenticity of the historical document. Since the central assumption upon which the contract was based proved false, a court could grant equitable rescission to cancel the sale, returning the document to the seller and the money to the buyer. This restores both parties to their original positions before the mistaken agreement, as the true value and nature of the item were fundamentally different from what was believed.