An equitable remedy which allows a party to a contract, to elect, upon the other’s breach, to cancel the contract, thereby eliminating all future obligations. Parties can elect to rescind where a vitiating factor has affected the contract, such as misrepresentation, mistake, duress, or undue influence.
Rescission operates to unwind the transaction, seeking to bring the parties, as much as is possible, back to the position they were in before they entered into the contract. Rescission is valid only where it is possible for parties to be properly restored to their original position. Rescission may be ordered as partial, or rescission on terms.
Rescission is not available where:
- The breach was an innocent misrepresentation (equity has jurisdiction)
- The contract has been executed (unless there was fraud)
- The contract was affirmed (by normal means or by lapse of time)
- Third parties have become involved and acquired rights
- The rescission was not effectively communicated to the party in breach