Contracts - Other Remedies (Rescission)

Question 1

Rescission

Answer 1

Original contract voidable and rescinded (as if no K ever made) + seek restitution
* Grounds for rescission must have existed before or at time of contract formation

Grounds:
* Mutual mistake of material fact
* Unilateral mistake where other party knew or should’ve known (or where hardship to mistaken party is extreme)
* Fraudulent or innocent misrepresentation of a material fact and other party justifiably relied on it (if misrepresentation occurred at/before entering into contract)
* Duress, undue influence, illegality, lack of capacity, failure of consideration, equitable defenses

Fraudulent Misrepresentation - either rescission or damages
* (i) misrepresentation of material fact
* (ii) made with knowledge of falsity and intent to deceive
* (iii) upon which plaintiff justifiably relied

Innocent Misrepresentation - only rescission allowed
* Defendant honestly and in good faith asserts material fact that is not true
* Plaintiff actually relies on it

Question 2

Rescission Defenses

Answer 2

Election of Remedies (Rescission lawsuit must be FIRST, then damages lawsuit)
* Remedies of damages for fraud and rescission of contract for fraud are inconsistent. If P seeks damages first, it proves that a contract exists, so a rescission suit to set contract aside is barred
* Therefore, P must (1) first sue to rescind contract and then (2) seek damages

Unclean Hands
* P seeking equitable remedy is guilty of wrongdoing in SAME transaction that’s being sued over (P did inequitable/wrongful conduct)
* Ex. P obtained D’s consent through fraudulent misrepresentation

Laches
* P delayed bringing lawsuit and this delay prejudiced defendant

Estoppel

Question 3

Reformation

Answer 3

(a) Agreement is in writing and must be changed to (b) reflect original intent of parties

Grounds
* Mistake (party made agreement and later made written agreement, but there was discrepancy)
* Misrepresentation: only if misrepresentation on content/legal effect of the RECORD; can’t be used for misrepresentations on subject matter (must use rescission and damages)

Question 4

Reformation Defenses

Answer 4

• Laches: P delayed bringing lawsuit and this delay prejudiced defendant
• Sale to BFP

NOT DEFENSES: Parol Evidence Rule, SOF, Negligence