Rescission vs Repudiation in Contract Law

In contract law, rescission and repudiation are two distinct concepts that refer to the termination of a contract but occur in different situations.

Rescission refers to the act of undoing or cancelling a contract and restoring the parties to their original positions as if the contract never existed. It is a remedy that allows a contract to be set aside, effectively canceling it. When a contract is rescinded, both parties are returned to the positions they were in before the contract was formed. This remedy is often used in cases of fraud, misrepresentation or duress, where one party was induced to enter into the contract under threats or based on false information provided by the other party. For example, if a person buys a car based on the seller’s false claim that it has never been in an accident, the buyer may seek rescission. If rescission is granted, the buyer would return the car and get their money back, and the seller would take back the car. Rescission is an equitable remedy, meaning it is at the discretion of the court and will not be granted if certain bars to rescission are present, such as if the injured party has affirmed the contract or if a significant amount of time has passed since the misrepresentation was discovered.

Repudiation refers to a party's declaration that he does not intend to fulfil his obligations under a contract. It occurs when one party to a contract refuses, rejects, or renounces his duty or obligation under the contract. This can happen either before performance is due or during the performance period and can involve a complete refusal to perform or a refusal to perform according to the terms of the contract. For example, if a contractor agrees to build a house by a certain date but later informs the homeowner that he will not be able to complete the project, this constitutes repudiation. Repudiation typically results in a breach of contract, giving the aggrieved party the right to seek legal remedies, such as damages or specific performance. The aggrieved party can also choose to treat the contract as terminated and seek compensation for any losses incurred due to the breach.

In summary, rescission is a legal remedy that cancels a contract, while repudiation is a breach of contract where one party declares their unwillingness to perform their obligations under the contract.