Rescission / Reformation

Question 1

Rescission

Answer 1

If awarded, original K is voidable and rescinded. Any previous performance will be paid restitution.

To see if rescission available,
Two step analysis:

1. Grounds
2. Defenses

Question 2

Grounds for Rescission

Answer 2

P must show there was defect relating to formation of K.
Examples:

Mistake

• Must be mutual, or unilateral if non-mistaken party knew or should have known of mistake
• Or, if mistaken party would suffer undue hardship

Misrepresentation
-If misrepresentation was Material and P relied on it.

Others: Coercion, Undue Influence, Lack of Capacity, Failure of consideration, Illegality

Question 3

Defenses for Rescission

Answer 3

Equitable defenses available (unclean hands, laches, etc.)

P’s negligence not a valid defense to rescission.

Question 4

Reformation

Answer 4

Court changes written agreement to conform to original understanding of parties.
3-step analysis:
1. Validity
-Must demonstrate existence of valid K. (not req’d for rescission)
2. Grounds
3. Defenses

Question 5

Grounds for Reformation

Answer 5

Reformation will be granted if:
Mutual mistake - defect in written agreement
Unilateral mistake - only if non-mistaken party KNEW of mistake
Misrepresentation - If defect in written agreement due to misrepresentation, whether intentional or innocent

Question 6

Defenses to Reformation

Answer 6

Normal equitable defenses (Unclean hands, Laches, etc.)

Also, a court will not reform a K that adversely affects a BFP.