The doctrine of rescission allows parties to terminate a contract, restoring them to their original positions as if the agreement never existed. In Indian law, this remedy addresses issues arising from voidable contracts, misrepresentation, fraud, undue influence, and other factors affecting the validity of agreements.
MEANING AND DEFINITION
Rescission is the annulment of a contract, rendering it void ab initio. Derived from the Latin term “rescindere,” meaning “to cut off” or “cancel,” it involves nullifying the contract and releasing parties from their obligations. The primary aim is to restore parties to their pre-contractual state.
LEGAL PROVISIONS GOVERNING RESCISSION
The Specific Relief Act, 1963, particularly Sections 27 to 30, outlines the conditions under which contracts may be rescinded in India.
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Section 27: Allows any interested person to sue for rescission in cases where the contract is voidable or terminable by the plaintiff, or if the contract is unlawful for reasons not apparent on its face, and the defendant is more at fault than the plaintiff.
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Section 28: Pertains to contracts for the sale or lease of immovable property, detailing circumstances under which a decree for specific performance can be rescinded.
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Section 29: Empowers the court to require the party rescinding a contract to restore any benefit received under the contract to the other party.
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Section 30: Addresses rescission of contracts in cases involving fraud or mistake.
GROUNDS FOR RESCISSION
Rescission can be sought under various circumstances:
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Misrepresentation: An untrue statement of fact that induces a party to enter into a contract.
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Fraud: Intentional deception to secure unfair or unlawful gain.
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Undue Influence: One party taking advantage of their position to unduly influence the other.
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Mistake: Both parties share a common misconception about a fundamental fact of the contract.
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Coercion: Compelling a party to enter into a contract through threats or force.
CASE LAW ILLUSTRATIONS
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Ranganayakamma v. Alwar Setti: In this case, the plaintiff was coerced into adopting a son under threat. The court held that the agreement procured by coercion was voidable, allowing for rescission.
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Prem Raj v. D.L.F. Housing & Construction Pvt. Ltd.: The court highlighted that a person suing for specific performance of a contract may alternatively sue for rescission, but not vice versa.
MAXIMS AND PRINCIPLES
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“Restitutio in integrum”: This principle aims to restore parties to their original positions prior to the contract.
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“He who seeks equity must do equity”: A party seeking rescission must be willing to return any benefits received under the contract.
PROCEDURE FOR RESCISSION
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Filing a Suit: The aggrieved party must file a suit in a competent court under the Specific Relief Act, 1963.
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Proving Grounds: The plaintiff must establish valid grounds for rescission, such as fraud, misrepresentation, or undue influence.
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Restoration: The plaintiff should be prepared to restore any benefits received under the contract to the defendant.
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Court’s Discretion: The court will assess the circumstances and decide whether to grant rescission, considering factors like changes in circumstances and third-party rights.
DEFENSES AGAINST RESCISSION
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Affirmation: If the aggrieved party, after becoming aware of the grounds for rescission, affirms the contract, they may lose the right to rescind.
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Laches: Unreasonable delay in seeking rescission can bar the remedy.
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Third-Party Rights: If third parties have acquired rights in the subject matter of the contract in good faith, rescission may be denied.
CONCLUSION
The doctrine of rescission serves as a crucial mechanism in contract law, ensuring that parties are not bound by agreements tainted by factors like fraud, misrepresentation, or undue influence. By understanding the legal provisions, grounds, procedures, and defenses associated with rescission, law students can appreciate its significance in upholding justice and fairness in contractual relationships.
REFERENCES
- Specific Relief Act, 1963.
- Indian Contract Act, 1872.
- Ranganayakamma v. Alwar Setti, AIR 1889 Mad 214.
- Prem Raj v. D.L.F. Housing & Construction Pvt. Ltd., AIR 1968 SC 1355.
- LawBhoomi – “Rescission of Contract under the Specific Relief Act.”
- iPleaders – “All you need to know about the effects of rescinding a contract.”
- Legal Wires – “Rescission of Contracts.”
- LeDroit India – “Rescission of Contract.”
- ComplyBook – “Novation, Rescission, Alteration under the Indian Contract Act.”
- Drishti Judiciary – “Rectification, Rescission and Cancellation.”