Legal Definitions - recission

Rescission is a legal remedy that essentially cancels or unwinds a contract, treating it as if it never existed. When a contract is rescinded, both parties are restored to their original positions before the contract was formed. This means any money, property, or services exchanged under the contract must be returned, aiming to put the parties back in the state they were in before they entered into the agreement.

Rescission is typically granted when a contract was formed under circumstances such as:

• Misrepresentation or Fraud: One party made a false statement of a material fact that induced the other party to enter the contract.
• Mutual Mistake: Both parties made a fundamental mistake about a key aspect of the contract.
• Duress or Undue Influence: One party was coerced or unfairly pressured into signing the contract.
• Material Breach: One party failed to fulfill a significant term of the contract.

Here are some examples illustrating rescission:

• Imagine a person buys a used car from a dealership. The salesperson explicitly states the car has a clean title and has never been in an accident. A week later, the buyer discovers through a mechanic's inspection and a vehicle history report that the car had significant prior damage from a major collision and a salvaged title, facts the dealership intentionally withheld. The buyer could seek rescission of the purchase contract, returning the car to the dealership and getting a full refund of their money, effectively undoing the sale as if it never happened.

• Consider a couple who signs a contract to purchase a new home. Before the closing date, they discover that the seller deliberately failed to disclose a severe, ongoing issue with the property's foundation, which requires extensive and costly repairs. Because this was a material fact intentionally hidden, the buyers could pursue rescission of the purchase agreement. This would allow them to cancel the sale, get their earnest money deposit back, and walk away from the deal without penalty, restoring them to their pre-contractual state.

• An elderly individual is convinced by a financial advisor to sign a complex investment contract, promising unrealistic returns. It later becomes clear that the advisor used high-pressure tactics and undue influence, taking advantage of the individual's vulnerability and lack of financial understanding. A court might order rescission of the investment contract, requiring the financial firm to return the individual's invested funds and voiding the agreement, thereby nullifying the transaction and restoring the individual's original financial position.