Rescission means the termination or annulment of a contract. This remedy is contrary to the relief of specific performance. This species of specific relief is the reverse of Specific Performance. Specific performance grants relief by enforcing the performance of a contract which binds the party, whereas the rescission discharges the party when it is not just to bind him. It means rescission is an equitable relief by which a contract is revoked or abrogated, and the parties are discharged from that contract.

II. When rescission is granted:-

The Court grants this equitable relief of rescission to any person interested in the contract in the following circumstances:-

i) Where the contract is Voidable or terminable by the Plaintiff (S. 27 (1)):-

A Voidable contract is an agreement which is enforceable at the option of one or more of the parties thereto but not at the option of the other or others[2]Thus, one of the parties to a voidable contract may avoid it.

Illustration

‘A’ sells a field to ‘B’. There is a right of way over the field of which ‘A’ has direct personal knowledge but which he conceals from ‘B’. ‘B’ is entitled to have the contract rescinded.

ii) Where the contract is unlawful (S. 27 (1)):-

The contract is rescinded where the contract is unlawful for causes not apparent on its face, and the defendant is more to blame than the Plaintiff.

Illustration

‘A’, an attorney, induces his client ‘B’, a Hindu widow, to transfer property to him to deceive ‘B’s creditors. Here the parties are not equally at fault, and ‘B’ is entitled to have the instrument of transfer rescinded.

iii) Rescission in the sale or lease of immovable Property (S. 28):-

Where the court has passed a decree of specific performance of a contract in favour of the purchaser or lessee of property for executing a conveyance (purchase) or lease deed, and the purchaser or Lessee then fails to pay the purchase money or other sums which he may have been required to pay, the court may in the same suit in which specific performance has ordered; order the rescission or cancellation of the contract. The object of this provision is to allow the rescission of the contract after the decree for Specific performance has failed to provide desired results so that a separate suit need not be filed to seek rescission of the contract.

III. When rescission is not granted (S. 27 (2) (a) to (d)):-

In the following circumstances, the law does not permit the exercise of the right of rescission of a contract.

1) When the contract has been affirmed or ratified by the Plaintiff[3]:-

The Court may refuse to rescind the contract where Plaintiff has expressly or impliedly ratified the contract.[4].

2) Where parties cannot be substantially restored to their original position[5]:-

The Court may refuse to rescind the contract where, owing to a change of circumstance which had taken place since the making of the contract (not being due to any act of the defendant himself), the parties cannot be substantially restored to the position in which they stood when the contract was made.

Illustration

A’ purchases a piece of cloth from B under a contract voidable at the option of A. A gets the piece of cloth converted into a suit. A’s right to avoid the contract cannot be exercised because he will not be in a position to return the suit piece cloth.

3) When third parties have acquired rights:-

The Court may also refuse to rescind the contract where third parties have, during the contract’s existence, acquired rights in good faith without notice and for value.

Illustration

In a contract of sale of certain goods between A and B, A’s consent has been obtained by misrepresentation, and so he has a right to avoid the contract. Before A avoids the contract, B sells those goods to C, while C is acting in good faith and has no notice of B’s defective title. C has acquired a good title to the goods, and A’s right to avoid the contract and take back the goods has come to an end.

4) Where part of a non-severable contract is sought to be rescinded[6]:-

Where only a part of the contract is sought to be rescinded, and such part is not severable from the rest of the contract, the court may refuse to rescind the contract.[7].

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[1] करार रद्द करणे [जो करार शून्यकरणीय हैं वो वापस लेना]

[2] (S. 2 (i) of the Indian Contract Act, 1872).

According to Indian Contract Act, 1872, S. 19. When the consent to an agreement is caused by coercion, fraud or misrepresentation’ the agreement is a contract Voidable at the option of the party whose consent was so obtained. Similarly, when the consent of a party to the contract has been obtained by undue influences the contract is Voidable at the option of the party whose consent has been so obtained, under Section 19-A of the Contract Act.

[3] जेव्हा वादीने कराराची पुष्टी केली किंवा त्याला मान्यता दिली [जब वादी द्वारा करार की पुष्टि की गई हो|]

[4] In Long v. Lloyd. ((1958) 1 W.L.R. 753)

Facts– A sold his lorry to B by making a false representation that the lorry was in “excellent condition”. On the lorry’s first journey B discovered serious defects in the lorry. He did not rescind the contract, but instead accepted A’s offer of half the cost of repairs. The lorry completely broke in the next journey and then B wanted to rescind the contract.

Court Held– that B, by accepting the offer of sharing the cost of repairs by A and thereafter continuing using the car, had affirmed the contract and he had now no right to rescind it.

[5] जेथे पक्षांना त्यांच्या मूळ स्थितीत बऱ्यापैकी पुनर्संस्थापित करता येत नाही [जहां पार्टियों को उनकी मूल स्थिति में पर्याप्त रूप से बहाल नहीं किया जा सकता है]

[6] जेथे विच्छेद न करता येणार्‍या कराराचा काही भाग रद्द करण्याचा प्रयत्न केला जातो [जहां एक गैर-विच्छेदनीय करार का हिस्सा रद्द करने की मांग की जाती है]

[7] K.S. Muthu v. Govindarajulu (AIR 2000 SC 3547).

Facts– In this case the plaintiff was directed by the court on August 30, 1997, to deposit the amount within one week, i.e., by September 6.1997. September 5 was declared a holiday. September 6 and 7 were Saturday and Sunday, which were general holidays. The plaintiff sought permission of the trial court to deposit the amount on 8th September, which was refused.

The Supreme Court held– that rejection of application to deposit amount on 8th September was improper. The trial court should not expect performance of something impossible, viz, deposit of amount on a holiday.