Understanding contract rescission

On Behalf of | Jun 21, 2021 | Uncategorized

Contract rescission may be rare, but it’s something that everyone in Texas should understand. Contracts may be rescinded, or voided, by a court when they’re determined to be invalid. A contract must meet certain standards in order to be valid. When it doesn’t reach them, a court can release parties from their responsibilities and even order that they be paid minor damages.

The goal of rescission

When a contract is rescinded, the court tries to restore the parties to the condition they were in before they entered into it. It only does this when there’s proof of a problem with a contract. For example, if someone is made to sign a contract under duress, that can be a reason for rescission. Or if there’s a requirement that one party does something illegal, a contract is void. Sometimes, all it takes is a problem with the language in a contract. That can also be a reason to void it.

When a contract is rescinded, it’s as if it never happened. Any money that changed hands as part of the contract must be returned to the original holder. In practical terms, when a contract is rescinded, the damages awarded are usually small. Contract rescission is often seen in business litigation. Contracts between two businesses can be rescinded. In some states, contracts between consumers and businesses are subject to rescission, also.

Right of rescission is a common feature in mortgage and insurance contracts. Everyone should read their contracts carefully and save copies of them. If you have questions about a contract you’ve entered into, contact a lawyer. An experienced attorney may be able to help you understand if the agreement is valid or not.