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When is rescission possible in a contract?

On Behalf of | Oct 10, 2023 | Business Law |

In the business world, contracts govern everything from the relationships you have with your workers to the agreements you have with suppliers, vendors and clients.

But what happens when an agreement doesn’t proceed as planned? Sometimes, one or both sides want to undo a deal that’s gone sour. That’s where rescission may come into play.

What is rescission?

Rescission is a legal remedy that allows parties to a contract to annul or cancel their agreement, essentially treating it as if it never existed. Legally, rescission aims to restore both parties to their original (pre-contract) positions. 

Ground for rescission include:

  • Mistake: When a fundamental or material mistake exists in the terms of the contract, rescission may be warranted. This could include mistakes about identity, price, quantity or fact, among other things. For example, if Company A orders 100 widgets from Company B only to find out that there was a typo on the order that turned 100 to 1000, rescission might be warranted.
  • Misrepresentation: If one party has made false statements or concealed material information to get the other party to enter into the contract, the deceived party may seek rescission. For example, if a contractor lied about being licensed, their client could seek to rescind their construction contract once they find out.
  • Duress and undue influence: Rescission can be pursued if one party was coerced into the contract under duress or undue influence since contracts have to be voluntary.
  • Mutual agreement: Sometimes both parties realize that the contract serves no good purpose for either of them. At that point, they can agree that their contract is void.

Sometimes, the solution to a contract issue is easy to see, but when you’re dealing with contract problems, it can pay to have experienced legal guidance by your side.