Rescind

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1) To cancel or unmake a contract. As the Connecticut Court of Appeals summarized in Wallenta v. Moscowitz, to rescind a contract is to “place the parties, as nearly as possible, in the same situation as existed just prior to the execution of the contract.” Once parties rescind a contract, the rights and obligations flowing from the contract cease to exist. 

Parties may voluntarily rescind a contract through mutual agreement. For example, in Penguin Group (USA) v. Steinbeck, the Second Circuit affirmed the parties’ agreement to rescind their 1938 Agreement where a new contract explicitly stated that it “will cancel and supersede the previous agreements.” Parties may also mutually rescind a contract through their conduct and the attendant circumstances, provided that such conduct and attendant circumstances clearly show an intent to rescind. For example, in J.R. Gray Co. v. Ritchey Flying Services, Inc., a Texas Court of Appeals affirmed that the parties, through their conduct, rescinded the contract. It summarized the law by stating that parties’ decision to rescind a contract “may be implied from acts, conduct with reference to their dealings with the property and need not be shown by an express agreement.”

A party may rescind a contract without the other party’s consent in certain circumstances, however—i.e. a party may unilaterally rescind for cause. Many jurisdictions have statutes that lay out specific situations when a party may unilaterally rescind a contract. For example, California Civil Code § 1689, in addition to allowing parties to rescind a contract through agreement, provides that a party may unilaterally rescind when: (1) when the party assented to the original contract by mistake, or their assent was obtained through duress, menace, fraud, or undue influence; when the consideration agreed to be given to the party seeking to rescind the contract (2) fails,  (3) becomes void, or (4) fails in any material respect;  (5) when the contract is unlawful; and (6) when upholding the contract would contravene public interest. Many jurisdictions, however, are hesitant to allow parties to unilaterally rescind a contract. In Pyskaty v. Wide World of Cars, LLC, the Second Circuit, ruling on New York contract law, stated that “[b]ecause [rescission] is an equitable remedy, rescission is available only if damages would not be a ‘complete and adequate’ remedy and ‘the status quo may be substantially restored’ by equitable relief.” Furthermore, the Court pointed out, a party who seeks to unilaterally rescind a contract for cause will, if successful, obtain rescission “in lieu of actual damages.” That is, a party generally cannot unilaterally rescind a contract and obtain money damages. 

2) See repeal

[Last updated in April of 2021 by the Wex Definitions Team]