Am Jur 2d - Contracts § 513

V. Modification, Extinguishment, and Renewal, C. Rescission, Termination, or Discharge, 1. Nature of Contractual Rescission, Termination, or Discharge, § 513 - Methods of discharge or termination of contracts

Generally, a contract may be canceled only under its own terms or through mutual agreement.[1] Contracts have the effect of law for the parties and may be dissolved only through the consent of the parties or on grounds provided by law.[2] A contract may be discharged by performance in accordance with its terms,[3] or by the expiration of the time during which it is to remain operative.[4] In addition, there are several other methods of discharging contracts, including rescission by agreement or by virtue of a contractual provision,[5] rescission for original invalidity,[6] and rescission for failure of consideration[7] or a material breach or default.[8] Parties to a valid contract may rescind or abandon it,[9] or substitute another in its place,[10] or by conduct inconsistent with the continued existence of the original contract estop themselves from asserting any right thereunder.[11]

Definition:

To "rescind" a contract is to abrogate or cancel the contract, unilaterally or by agreement, or to make void; to repeal or annul.[12]

Rescission is an equitable remedy that invalidates an agreement,[13] not a cause of action,[14] which rests on the equitable principle that a person shall not be allowed to enrich him- or herself unjustly at the expense of another.[15] The effect of the remedy of rescission is generally to extinguish a rescinded contract so effectively that in contemplation of law it has never had existence,[16] and to put or restore the parties to status quo.[17] The remedy of rescission and restitution is an alternative to damages in an action for breach of contract.[18]

Practice Tip:

The termination of a contract is not presumed, and the burden of establishing it rests upon the party who asserts it.[19]

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1   Innovative Modular Solutions v. Hazel Crest School Dist. 152.5, 2012 IL 112052, 358 Ill. Dec. 343, 965 N.E.2d 414, 279 Ed. Law Rep. 424 (Ill. 2012) , as modified on denial of reh'g, (Mar. 26, 2012).

2   Mobile-One Auto Sound, Inc. v. Whitney Nat. Bank, 78 So. 3d 807 (La. Ct. App. 4th Cir. 2011) .

3   M.M. & D.D. Brown v. Western Maryland Ry. Co., 84 W. Va. 271, 99 S.E. 457, 4 A.L.R. 522 (1919) .

4  As to duration and expiration of contract, see §§ 519 , 520 .

5   In re Nickels Midway Pier, LLC, 372 B.R. 218 (D.N.J. 2007) .
 As to rescission by agreement, see §§ 524 to 534 .

6  As to rescission for cause and invalidity of contract, see §§ 536 to 538 .

7  As to rescission for cause and failure or want of consideration, see § 539 .

8  As to breach or default in performance, see §§ 541 to 554 .

9  As to abandonment, see §§ 517 , 518 .

10  As to modification by consent or new agreement, see § 496 .

11   Hinshaw v. Ligon Industries, L.L.C., 551 F. Supp. 2d 798 (N.D. Iowa 2008) .

12   Devine v. Buki, 289 Va. 162, 767 S.E.2d 459 (2015) ; Bossie v. Boone County Bd. of Educ., 211 W. Va. 694, 568 S.E.2d 1, 168 Ed. Law Rep. 945 (2002) .
 "Rescission" of a contract is the abrogation, annulment, avoidance, or cancellation of the contract, especially a nullification of the contract by act of a party. Hoeft v. Five Points Bank, 248 Neb. 772, 539 N.W.2d 637 (1995) .

13   Haman Ents., Inc. v. Sharper Impressions Painting Co., 2015-Ohio-4967, 50 N.E.3d 924 (Ohio Ct. App. 10th Dist. Franklin County 2015).
 A rescission is an avoidance of a transaction and will normally be accompanied by restitution on both sides; rescission is thus less a remedy and more a matter of conceptual apparatus that leads to the remedy. Kofmehl v. Baseline Lake, LLC, 167 Wash. App. 677, 275 P.3d 328 (Div. 3 2012) , aff'd, 177 Wash. 2d 584, 305 P.3d 230 (2013) .

14   Taguinod v. World Sav. Bank, FSB, 755 F. Supp. 2d 1064 (C.D. Cal. 2010) ; Barnett v. Countrywide Bank, FSB, 60 F. Supp. 3d 379 (E.D. N.Y. 2014) .

15   Lenel Systems Intern., Inc. v. Smith, 106 A.D.3d 1536, 966 N.Y.S.2d 618 (4th Dep't 2013) .

16   Graves v. Wayman, 859 N.W.2d 791 (Minn. 2015) .

17   Lenel Systems Intern., Inc. v. Smith, 106 A.D.3d 1536, 966 N.Y.S.2d 618 (4th Dep't 2013) .

18   Little Mountains Enterprises, Inc. v. Groom, 141 Conn. App. 804, 64 A.3d 781 (2013) .

19   Armour & Co. v. Celic, 294 F.2d 432 (2d Cir. 1961) .

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