Legal Definitions - rescissory action

A rescissory action is a legal proceeding initiated by one party to a contract or transaction to have it legally undone or canceled. The primary goal is to restore all parties involved to the positions they were in before the contract was made, as if the agreement never existed. This remedy is typically pursued when there has been a significant flaw in the contract's formation, such as fraud, material misrepresentation, duress, undue influence, or a fundamental mistake that undermines the validity of the agreement.

• Example 1: Misrepresentation in a Real Estate Sale

  A buyer purchases a commercial property after the seller explicitly states in writing that the building's roof was replaced just two years ago and comes with a transferable warranty. After closing, the buyer discovers that the roof is actually 15 years old, in poor condition, and has no warranty. The cost to replace it is substantial.

  Illustration: The buyer could initiate a rescissory action to cancel the property purchase agreement, return the property to the seller, and recover their purchase money, arguing that the seller's material misrepresentation about the roof's age and warranty fundamentally misled them into the transaction.

• Example 2: Duress in a Business Partnership Agreement

  A small business owner is threatened with severe financial ruin and physical harm to their family by a larger competitor unless they sign a partnership agreement that is overwhelmingly unfavorable and essentially transfers control of their business to the competitor for a minimal sum.

  Illustration: The small business owner could file a rescissory action to nullify the partnership agreement, asserting that they signed it under duress, meaning they were coerced and did not enter into the contract voluntarily or with genuine consent.

• Example 3: Mutual Mistake in an Art Sale

  An art collector purchases a painting from a gallery, and both the collector and the gallery genuinely believe it to be an original work by a famous artist, based on what they thought was credible provenance. Years later, it is definitively proven by experts that the painting is a very skillful forgery.

  Illustration: The art collector could bring a rescissory action to cancel the sale of the painting, return the forgery to the gallery, and reclaim the purchase price. This action would be based on the argument that both parties entered the contract under a fundamental mutual mistake regarding the authenticity and value of the artwork.