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Contract Rescission and Related Consequences

Business and Commercial Disputes By Harvey Binnall PLLC - 2019/03/08 at 10:10am

Contact an Experienced Alexandria Business Dispute Lawyer

If you have entered into a contract, rescission — an equitable remedy at-law — may be a pathway to moving forward and avoiding the hassle of extensive litigation surrounding a contract dispute.  Contract rescission can be rather confusing for those who are not familiar with the concept.

Let’s explore the basics.

What is Contract Rescission?

Rescission is an equitable, discretionary remedy available to contracting parties who are seeking to terminate a contract (for a variety of reasons) and position themselves in a manner that most closely reflects their status prior to the contract having been initiated in the first place.  Rescission can perhaps most simply be described as the cancellation of the original contract.  It renders the entire contract invalid and therefore unenforceable by law.  There is no partial rescission.

Contract rescission may be mutual, in which case both parties can peacefully terminate the underlying contract and move on without conflict over damages (and other such issues).  In many cases, however, rescission is brought forth unilaterally.

Unilateral contract rescission is not always granted, and in fact, the circumstances must be such that rescission is the most “just” remedy available.  Generally speaking, rescission will not be allowed in disputes where some of the duties under contract have already been discharged and significant losses have been sustained — or will be sustained, if the contract were to be rescinded.

If a third-party has received a benefit as a result of the contract, for example, then rescission would not be a just remedy.  Breach of contract would be more suitable, as damages could be evaluated and allocated appropriately.

Unilateral contract rescission requires that the contract be invalid in some way.  Examples of misconduct or mistakes that justify unilateral contract rescission include:

  • Contract made without full manifestation of consent
  • Material misrepresentation
  • Duress
  • Undue influence
  • Breach of fiduciary duty
  • Unconscionable conduct
  • Fraud
  • Mistake
  • Lack of capacity of one of the contracting parties
  • Anticipatory repudiation of the contract
  • Consideration is illegal or inadequate
  • Contract is against public policy

Consequences of Contract Rescission

Contract rescission does not generally allow for a breach of contract lawsuit, or any other lawsuit that depends on the existence of a valid and enforceable contract.  Damages are also unlikely to be significant and may only be available for minor costs associated with the processing of the contract prior to its rescission.

For example, if you have purchased materials to fulfill a contract, then the court may allow for rescission (but grant compensation for the cost of materials).  Significant losses will likely preclude the use of rescission as a remedy.

Contact Harvey & Binnall, PLLC for Guidance

Harvey & Binnall, PLLC is a boutique commercial litigation firm whose attorneys have extensive experience advocating on behalf of both plaintiffs and defendants in a range of commercial disputes, including complex breach of contract disputes in which an equitable remedy — such as rescission — is sought by one or more parties.

Ready to move forward with your claims?  Call 703-888-1943 or send us a message online to speak to a skilled Alexandria business dispute lawyer at Harvey & Binnall, PLLC.  We encourage you to contact us at your earliest convenience — we engage closely with clients from the beginning of a dispute to ensure that we have the information necessary to tailor representation to more effectively serve their interests.