Rescission Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Rescission, written in plain English, along with examples of how it is used.

What is Rescission?

(n) Rescission is the mutual agreement between the partied to an agreement or contract, deciding to nullify, cancel or otherwise terminate the agreement entered among them and restore the position prior to that agreement

History and Meaning of Rescission

Rescission is a legal term that refers to the cancellation or nullification of a contract or agreement, and reestablishing the parties to their original positions as if no contract had been formed. It is a mutual agreement between parties to undo a transaction or contract based on various reasons, legally or equitably. Rescission is common in contract law when one or both parties enter a contract under a mutual mistake of material fact, fraudulent misrepresentation, undue influence, duress, mistake of law, or lack of capacity of one or both parties to make the contract.

Rescission is a remedy to undo a transaction, and it’s different from void or voidable contracts. A void contract is unenforceable from the beginning, while a voidable contract is valid, but one party has the option to cancel it.

Examples of Rescission

  1. Bob purchases a used car from Dan but later finds out that the odometer reading was false, and the vehicle had a higher mileage than what Dan represented. Bob initiates rescission to cancel the sale and recover his money.

  2. Jane enters into a contract with a landscaping company to maintain her lawn during the summer. A week later, Jane learns that the same company destroyed a neighbor's garden, prompting rescission of the contract.

  3. A company signed a contract to buy raw materials from a supplier but discovered later that the supplier pressed them into signing a contract that contains unfavorable terms not initially discussed. The company can rescind the contract after proving under duress.

Related Terms

  1. Mutual Mistake: A mutual mistake of fact occurs when both parties were under a mistaken belief about a material fact of the subject matter of a contract.

  2. Unconscionable Contract: An unconscionable contract is one-sided and grossly unfair, leading to undue hardship.

  3. Duress: Duress is the use of force, coercion, threat, or pressure to compel a party into an action that they would not have taken willingly.