Rescission Remedy Reminders For The Changing Commercial Environment

• Published date: 05 May 2020
• Author: Ms Shannon K. Hayes and Jay Moch
• Subject Matter: Corporate/Commercial Law, Environment, Coronavirus (COVID-19), Contracts and Commercial Law, Environmental Law, Litigation, Contracts and Force Majeure
• Law Firm: Lawson Lundell LLP

With the onset of the COVID-19 virus, the oil price war, and the resulting economic fallout from both events, the commercial environment has significantly changed. That change in the commercial environment has caused businesses and individuals to mitigate against risk and loss.

The commercial situation in which parties entered into contracts before the economic fallout, but for which closing was to occur after the fallout, poses a unique legal situation. Many of these parties are attempting to "stop", "cancel" or "undo" the contract in such circumstances before closing. In these efforts, some have attempted to apply the doctrine of rescission.

Rescission is a discretionary remedy that renders a contract void ab initio (or from the beginning). This requires the parties to be put back into the position they would have been had the contract not been made. For rescission to occur the rescinding party must make an election to rescind within a reasonable time after obtaining...