Termination is a legal remedy that cancels a contract and returns parties to their previous state. It can be enforced by one party or by a judge. The most common reasons for termination are error and misrepresentation. The non-rescissor can use defenses such as laches or the unclean hands doctrine. The defendant can also use defensive remedies if the plaintiff has already requested compensation for damages.
Termination is a judicial remedy in contract law that terminates a contract and returns the parties to their states prior to entering into an agreement together. It may be enforced lawfully by one of the parties or fairly by decree of a judge. There are several reasons for termination, although the two most common are error and misrepresentation.
Parties are said to revert to the status quo ante, which is a Latin phrase for “the way things were before,” after an agreement is terminated. The plaintiff will be refunded any amount paid by him in consideration of the settlement and the defendant will not be required to perform any obligation imposed by the settlement. The facts of the case determine whether or not the contract can be terminated as an equitable remedy for the parties. The reason that made the contract void must also have occurred or occurred before the parties entered into the contract.
Termination may be effected by legal or equitable means. Judicial rescission occurs when the plaintiff terminates the contract by communicating to the other party the intention to withdraw and returning any consideration given. Equitable termination is the most common use of the term and refers to a court order that cancels the contract and restores the parties to the status quo ante.
The two main reasons for breaking a contract are error and misrepresentation. While there are both unilateral and reciprocal errors in contract law, reciprocal error – when both parties have the same material misunderstanding about the rights and responsibilities involved in the contract – is generally the only type of error that will lead to rescission. However, if either party makes a material misrepresentation and the other party agrees to the terms of the agreement on the actual reliance on such misrepresentation, the contract may also be terminated. This is true whether the misrepresentation was made innocently or with fraudulent intent.
The non-rescissor has at his disposal some defenses to prevent the termination of the contract. If the plaintiff intentionally delayed enforcement by causing damage or harm to the defendant, then the defendant may invoke the laches defense – a statute of limitations – to prevent the recovery. Similarly, the “unclean hands doctrine” can be invoked as a defense if the plaintiff is guilty of misconduct in connection with the settlement. The most common, however, is the election of defensive remedies that the defendant can invoke in the event that the plaintiff has already requested compensation for damages; the rationale for that defense is that, by seeking damages, the plaintiff has affirmed the contract and cannot seek termination at that point.
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