Equity: Rescission

Rescission

What is Rescission?

Rescission is an equitable remedy. It renders a contract or similar transaction unenforceable and rewinds the parties’ position to before the transaction was entered.

When is Rescission Available?

Rescission is usually only granted if it possible to restore the parties to their original, pre-transaction position. This is known as the principle of restitutio in integrum.

Rescission is available as a consequence of many contractual and transactional defences, such as undue influence, economic duress and misrepresentation.

Since a person who comes to equity must do equity, the claimant must be willing to give back any benefits received under the transaction.

When is Rescission Unavailable?

Rescission is a discretionary remedy, and can be refused on a variety of grounds.

Restitutio in integrum impossible

Rescission will normally be refused if restitutio in integrum is impossible: Clarke v Dickson (1858) EB & E 148. There is an exception for breaches of fiduciary duty, where rescission may be ordered even if restoration is impossible: Elanger v New Sombrero Phosphate (1878) 3 App Cas 1218.

Third-party rights

Rescission is not possible if a third party has acquired property in the subject matter of the transaction for consideration and without notice of the defect in title: Lewis v Avery [1971] 3 WLR 603.

Affirmation

If the claimant, with full knowledge of the breach which makes the transaction voidable, communicates to the other party that the transaction is still valid, or behaves as if it is still valid, the right to rescind is lost: Sharpley v Louth [1876] 2 Ch D 663.

Excessive Delay

Excessive and unjustified delay can bar the right to rescind a transaction in some cases: Leaf v International Galleries [1950] 2 KB 86. This is an application of the equitable maxim that equity assists the vigilant, but not the indolent.