Rescission of Contract: Meaning and Definition
Contracts are an essential part of business dealings. They are meant to be legally binding agreements between two or more parties. However, circumstances may arise that may warrant the cancellation or termination of such agreements. This is where the rescission of the contract comes in.
Rescission refers to the unmaking or revocation of a contract. It is a remedy that is available to parties when one or more of the terms of a contract have been breached or when a party has made a misrepresentation or fraudulently induced the other party to enter into the contract. The rescission of a contract essentially nullifies the agreement and restores the parties to their previous positions before the contract was made.
For instance, suppose you have entered into a contract to purchase a car from a dealership, and you later discover that the dealership misrepresented the condition of the vehicle. In that case, you may seek rescission of the contract to get your money back and return the car to the dealership.
Rescission can also be initiated by mutual consent. This happens when both parties agree to terminate the contract for any reason. In such a case, the parties will have to agree on the terms of the termination and ensure that any obligations that were created by the original contract are adequately discharged.
The rescission of a contract can be done in two ways, either by legal action or by mutual agreement. When rescission is initiated through legal action, the party seeking relief will have to file a lawsuit against the other party to ask the court to declare the contract null and void. This is usually done if the other party is unwilling to agree to the rescission, or if they dispute the grounds for rescission.
On the other hand, rescission by mutual agreement involves both parties agreeing to terminate the contract. In such a case, the parties will have to negotiate the terms of the termination and ensure that any obligations created by the original contract are adequately discharged.
In conclusion, the rescission of a contract is a legal remedy available to parties when one or more of the terms of the contract have been breached, when the contract was entered into fraudulently, or when both parties agree to terminate the agreement. Rescission essentially nullifies the contract and restores the parties to their previous positions before the contract was made. As such, it is essential to understand the meaning and definition of rescission and the circumstances that may warrant its application in business dealings.