rescission

Rescission is a legal remedy that cancels a contract and restores the parties to the positions they occupied before the agreement was formed. It effectively treats the contract as if it never existed, releasing the parties from their obligations and undoing performances that have already occurred where feasible.

Rescission can arise by mutual agreement of the parties or unilaterally in response to factors such as misrepresentation, fraud, mistake, duress, undue influence, or breach by one side. In some legal systems, courts may order rescission as a remedy for unlawful or inequitable contracts, or where performance cannot be completed as promised.

For rescission to be effective, parties are generally required to return the consideration received and to restore their respective positions as far as possible. If restoration is impossible or impracticable, the remedy may be limited to restitution or may be replaced by damages rather than true rescission.

Limitations: Rescission is typically unavailable for contracts that have been fully performed or where restitution cannot be made without disproportionate difficulty. In property transactions, rescission returns title and funds to the pre-sale state, subject to any applicable liens or encumbrances.

Specific contexts exist. In real estate and consumer finance, statutory rights of rescission may apply. For example, under certain consumer lending laws a borrower may have a three-business-day right of rescission for loans secured by the borrower’s principal dwelling.