Rescission
The cancellation of a contract that restores both parties to the position they occupied before the agreement was made, treating the contract as if it never existed.
What Is Rescission?
Rescission is an equitable remedy that unwinds a contract, returning each party to its pre-contract status. Unlike termination, which ends future obligations, rescission undoes the contract from inception. It is often paired with restitution, requiring each party to return any benefits received under the agreement.
Grounds for Rescission
- **Mutual mistake** about a material fact at the time of contracting - **Fraud or misrepresentation** that induced the other party to enter the contract - **Duress or undue influence** that overcame a party's free will - **Lack of capacity** by a minor or mentally incapacitated party - **Failure of consideration** when the bargained-for exchange does not materialize
Procedural Requirements
A party seeking rescission must generally act promptly upon discovering the grounds, restore (or offer to restore) any benefits received, and demonstrate that monetary damages would not provide adequate relief. The doctrine of laches may bar rescission if the party delays too long. Some contracts (such as door-to-door sales and certain federally regulated transactions) include a statutory right of rescission allowing the buyer to cancel within a defined cooling-off period, often three business days.