Contracts Recission Law & Legal Definition

A recission of a contract is the destruction or annulling of a contract. A contract cannot be rescinded in part, a whole recission of the contract must be made. In order to have a recission, both parties to the contract must be placed in the position they occupied before the contract was made. Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds.

The relevant section of the Uniform Commercial Code, adopted in some form by almost all states, provides as follows:

"(a) A contract may be rescinded if all the parties thereto consent.

(b) A party to a contract may rescind the contract in the following cases:

1. If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.
2. If the consideration for the obligation of the rescinding party fails, in whole or in part, through the fault of the party as to whom he rescinds.
3. If the consideration for the obligation of the rescinding party becomes entirely void from any cause.
4. If the consideration for the obligation of the rescinding party, before it is rendered to him, fails in a material respect from any cause.
5. If the contract is unlawful for causes which do not appear in its terms or conditions, and the parties are not equally at fault.
6. If the public interest will be prejudiced by permitting the contract to stand.
7. Under the circumstances provided for in Sections 39, 1533, 1566, 1785, 1789, 1930 and 2314 of this code, Section 2470 of the Corporations Code, Sections 331, 338, 359, 447, 1904 and 2030 of the Insurance Code or any other statute providing for rescission."

Some states' laws regulate door-to-door sales, false labeling, unsolicited merchandise, abusive collection practices, misleading advertising and referral and promotional sales. For example, promotional sales for timeshare properties in some states must allow a certain number of days for the consumer to rescind the agreement. Such laws vary by state, so local laws should be consulted.

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