Rescission

Definition

Rescission is a legal remedy for a material breach of contract under which the law pretends that a contract never existed and attempts to put the parties in the positions they occupied before the contract was executed; essentially, it is a cancellation.

Purpose

The purpose of rescission is to nullify a contract and restore the parties to their pre-contractual state, providing a remedy when a contract has been significantly breached or misrepresented.

Examples of Use

• A buyer may seek rescission of a real estate contract if the seller fails to disclose significant property defects.
• A consumer might rescind a contract for the purchase of a defective product that was misrepresented by the seller.
• In employment contracts, rescission may occur if the terms were based on fraudulent information.

Related Terms

• Breach of Contract: A violation of any of the agreed-upon terms and conditions of a binding contract.
• Restitution: The return of benefits or compensation to the party from whom they were received.
• Voidable Contract: A valid contract that can be legally canceled or annulled.

Notes

Rescission is often accompanied by restitution, where both parties must return any benefits or property exchanged under the contract to ensure fairness.