INTRODUCTION
Rescission means cancellation of the contract by mutual consent. The basic purpose and intent of the Equity Court is to grant maximum relief to the sufferer. When any contract is made through fraud, undue influence, coercion, mistake, or misrepresentation, it is voidable. All these contracts are rescindable. The Court may grant the relief of rescission of the contract if it does not show the real intention of the parties.
The Court may also refuse the rescission of the contract when the right of the third party in good faith or the right of the purchaser without notice has arisen due to the contract in question.
RELEVANT PROVISIONS
Sections 35 to 38 deal with the rescission of the contracts.
LITERAL MEANING
To “rescind” means “to make no effect”. Rescission is an equitable remedy that is opposite to that of the specific performance of the contract, by using the night of rescission the party can set aside the transaction made by the contract and restore to it its former position.
DEFINITION OF RESCISSION
According to Section 62 of the Contract Act 1872:
“Rescission means cancellation of the contract by mutual consent. A contract can only be cancelled by agreement between the parties at any time before it is discharged by performance. The cancellation of the agreement releases the parties from their obligation arising out of the contract.”
SCOPE OF RESCISSION
The parties can rescind a contract by the institution of the suit in the Court by their mutual consent. Section 35 of the Specific Relief Act, 1877 sets out the three exceptional cases to the general rule that a contract can not ordinarily be rescinded by one party without the consent of the other. Under section 35 of the Specific Relief Act, of 1877, an aggrieved party can obtain relief without the consent of the other party.
When the Rescission may be Adjudged?
A person can file a suit for rescission of the contract in the Court. The Court may adjudge the suit in the following cases.
1. When the Contract is Voidable?
A contract is voidable when it has been made through fraud, undue influence, coercion, or misrepresentation. A party who may be a victim of such fraud, undue influence, coercion or misrepresentation, may avoid such a contract.
2. When the Contract is Terminable?
A terminable contract ordinarily contains a stipulation that on the happening of a certain event, the contract may be terminable. A contract may contain within itself terminable in the following cases.
- When a vendor fails to show a good title to the property in question
- When the purchaser fails to pay consideration within a stipulated period
The above-mentioned contracts are terminable and may be rescinded by the plaintiff to put them to an end.
3. When the Contracts are Unlawful?
The specific relief of rescission is not applicable if the nullity of a contract is apparent upon the face of the contract.
The contracts that are not operative apparently and unlawful, have been mentioned in clause (b) of section 35 of the Specific Relief Act, of 1877.
4. Default in Payment of Purchase-money
If a suit for the specific performance of the contract or of a contract to take a lease of the plaintiff is decreed in his favour and the Court orders the decree-holder to pay the purchase money to the Court, the contract may be rescinded. The Court has the power to rescind such a contract on non-payment of the purchase money in default.
Remedy in Case of Wrongful Possession
There are some cases in which the purchaser or lessee remains in wrongful possession of the property for a long time If the Court finds that the purchaser or lessee is in wrongful possession of the property, the Court may order the wrongful possessor to pay the rent of profits to the vendor or lessor.
Nature of Relief
The relief which is granted by the Court in the cases of rescission of the contract is discretionary. This has also been said in section 38 of the Specific Relief Act, 1877 that the Court has the power if it grants relief to impose such terms upon the plaintiff as the justice of the case may require.
Who may Ask for Rescission?
It is also a very vital question in the doctrine of rescission of the contract who can ask for the rescission of the contract Section 35 of the Specific Relief Act, of 1877 answers this question Any person interested in a contract in writing may sue for the rescission of the contract.
Refusal for Rescission
There are some conditions in which the Court would not allow the rescission of the contract. These are as under.
- Where the parties can not be restored to their original position in which they were at the time of the contract
- Where the plaintiff has expressly or impliedly ratified the contract
- Where the third parties, or the purchaser without notice for value have acquired rights in good faith, during the subsistence of the contract.
- Where only a part of the contract is sought to be rescinded and it is not severable from the rest of the contract
Conditions to be Satisfied for Rescission
There are some conditions that a plaintiff must fulfil before the institution of the suit for the rescission of the contract. These are as under
- There must be an element of fraud in making the contract
- There must be an element of undue influence in making the contract.
- There must be an element of coercion in making the contract
- There must be an element of misrepresentation in making the contract.
- There must be an element of mistake in making the contract.
- Where there is a term in a contract for its rescission, the contract will be liable to be rescinded
Fixation of Compensation
Section 38 of the Specific Relief Act, of 1877 leaves it to the Court to fix the compensation according to the justice of the case. This section is not concerned with the case of a plaintiff who seeks rescission and damages. It refers to the special case where a defendant on a decree for rescission of a contract is entitled to compensation. It is also pertinent to mention here that there would be no question as to compensation under section 38 of the Specific Relief Act, of 1877 where an action for rescission is dismissed.
EFFECT OF RESCISSION
The effect of rescission is the restoration of the plaintiff to his original position as if the contract had not been made. The parties must be returned to their former position. The possessor must give up the possession. The accounts taken of profits and rents must be returned and deterioration must happen in case of the rescission of the contract
CONCLUSION
It is concluded that the rescission can be adjudged on the grounds of voidability of the contract which includes mistake, misrepresentation, constructive fraud & fraud. misrepresentation, In the case of a contract it can be rescinded.
FAQs
What are the rules relating to the rescission of a contract as laid down in the Specific Relief Act? Discuss in detail.
(2019-A, 2018-S)
What is the Rescission of a contract and how does this differ from cancellation?
(2017-S, 2017-A, 2016-A, 2015-A, 2014-A)
What are the principles and procedures for the rescission of a contract? Explain.
(2009-A)
What is the rescission of the contract? When a contract cannot be rescinded?
When a person can sue for the recession of contract and on what grounds? Discuss.
