Rescission of Contract (Sections 27–30, Specific Relief Act, 1963)

Introduction

The Specific Relief Act, 1963 provides remedies when contractual rights are violated.
One such remedy is rescission, which allows a contract to be cancelled when it becomes unfair, illegal, or voidable.

The aim of rescission is to restore both parties to their original position before the contract (status quo – the earlier situation before the agreement).

Meaning / Definition

Rescission means the cancellation or unmaking of a contract.
When a contract is rescinded, the agreement is treated as if it never existed.

The court attempts to return the parties to the same position they were in before the contract was made.

Sections 27 to 30 of the Specific Relief Act, 1963 deal with rescission of contracts.

Modes or Types

Rescission by the Court (Section 27)

A court may cancel a contract in the following situations:

Contract is voidable or terminable by the plaintiff

If the contract is voidable (a contract that can be cancelled by one party), the injured party can ask the court to rescind it.

Example: A contract obtained through fraud (cheating or deception).

Contract is unlawful and the defendant is more at fault

If the contract becomes illegal for reasons not obvious from the contract itself, and the defendant is more responsible for the illegality, the court may allow rescission.

Loss of Right of Rescission (Section 28)

In certain situations, the right to rescind a contract is lost.

Affirmation of the contract

If the injured party, after knowing the right to cancel the contract, accepts or confirms the contract, rescission is not allowed.

Affirmation can be:

• Express affirmation – openly stating that the contract will continue
• Implied affirmation – continuing to enjoy the benefits of the contract

Restoration not possible

Rescission requires both parties to return what they received under the contract.

If this is impossible (for example, goods have been used or destroyed), rescission may not be allowed.

Intervention of third parties

If the goods have already been transferred to a bona fide purchaser (a person who buys honestly without knowing about the fraud), the original seller cannot rescind the contract.

Severance not possible

If the plaintiff tries to cancel only a part of the contract, rescission is not allowed unless that part can be separated from the rest of the agreement.

Rescission After Decree of Specific Performance (Section 28)

Sometimes a court orders specific performance (forcing a party to perform the contract).

If the buyer fails to pay the purchase price within the time fixed by the court, the seller may ask the court to rescind the contract.

The court may then:

• order the buyer to return possession of the property, and
• direct the buyer to pay rent for the period he used the property.

Rescission as an Alternative Relief (Section 29)

A person who files a suit for specific performance may also request the court:

• that if specific performance cannot be granted, the contract should be rescinded and cancelled.

This allows the plaintiff to obtain another remedy if the main remedy fails.

Restoration of Benefits (Section 30)

When the court grants rescission, it may order the parties to return any benefits received under the contract.

This ensures fairness and justice between the parties.

Practical Example

A sells a machine to B by hiding important defects in the machine.

Later, B discovers that A had fraudulently concealed (deliberately hid) the defects.

B may approach the court and ask for rescission of the contract, so that:

• the machine is returned to A, and
• B receives back the money paid.

Summary

• Rescission means cancelling a contract and treating it as if it never existed.
• It aims to restore the parties to their original position before the contract.
• Sections 27–30 of the Specific Relief Act, 1963 deal with rescission.
• A contract may be rescinded if it is voidable, unlawful, or obtained through fraud or illegality.
• The right of rescission may be lost due to affirmation, impossibility of restoration, third-party rights, or non-severable contracts.
• Rescission may also occur after a decree of specific performance if the buyer fails to comply with the court’s order.
• The court may require parties to restore benefits received under the contract to ensure fairness.