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Rescission is an equitable remedy that results in the cancellation of a contract.

See: Evanston Insurance Company v. Desert State Life Management.

Rescission allows a party to stop performing its duties under a contract and aims to place the parties in a status quo, which is to return them to their position before the contract. See: In re Wiggins

Rescission is available to a party when there has been a misrepresentation of a material fact, and the misrepresentation was made to be relied on, and has been relied on. The typical reasons for rescission include fraud, duress, unilateral or mutual mistake, and inadequacy of consideration. However, a party must rescind the contract in a timely manner.

A mutual mistake in rescission includes a mistake in writing the contract and any misunderstanding between the parties in the making of the contract as to cause no mutuality of assent. A mutual mistake of fact must be about either a present of prior fact or facts that are material to the contract. 

Regarding fraud, the Court of Appeals of California, Fourth District, Division Two noted in Akin v. Certain Underwriters at Lloyd’s London that a party to a contract has two available remedies when it has been harmed by a breach or fraud and it could no longer or does not want to maintain the contract. The party could either:

  • Rescind the contract and recover the damages from the rescission, or 
  • Affirm the contract and recover the damages for breach of contract or fraud. 

See also: Wong v. Stoler.

[Last updated in March of 2024 by the Wex Definitions Team]