Contract breaches can be very frustrating. After all, both parties agreed to certain terms initially. However, one party refuses to uphold the contract.
In a breach of contract scenario, there are many forms of relief available through civil action. The party negatively impacted by the contract breach could request damages or ask the courts to enforce penalty clauses. They could ask for an injunction or an order of specific performance. However, contract rescission can sometimes be the best available solution.
How rescission works
Many contracts include severability clauses. Essentially, the contract remains fully enforceable even if one party breaches certain aspects of the agreement. Contract rescission occurs when one party successfully asks the courts to terminate contractual obligations. A judge can declare the agreement invalid, thus terminating any ongoing obligations.
Why rescission is helpful
When one party has proven a willingness to violate a contract, the other party may no longer want to do business with them. Eliminating any contractual commitments can protect those who trusted the wrong individual, professional or business from future operational headaches and financial challenges.
Rescission allows for the end of the working arrangement between the two parties. The cancellation of the contract through the courts can help protect the plaintiff from allegations that they violated the contract in the future. It can also result in an obligation to refund money transferred as a deposit or as payment for services not rendered or products not delivered.
In scenarios wherein continuing to do business together after a contract breach seems untenable, requesting rescission during breach of contract litigation could be the best option available. Evaluating different solutions for contract issues in pending business litigation with a skilled legal team can help executives and business owners minimize the losses incurred due to another party’s failure.