An agreement is a legally binding document that forces two or more parties to fulfill their duties, responsibilities and act upon mutually agreed terms and conditions. When two individuals or two organizations conduct business together, there is always room for miscommunication, misunderstanding or human error. In order to eliminate these factors, involved parties enter into legally binding agreements and until the business is done, the agreement stays functional keeping all involved parties bound by the law to act upon their responsibilities. However, there are some situations where a party or all involved parties mutually agree to cancel the agreement because there is some ambiguity that wasn’t visible before, a fraud committed from either of the party or intentional delay in delivering services as per the agreement.
What is an example of rescission?
In this scenario, these parties can file a case in the civil court and ask the judge to review the case and cancel the agreement while asking all involved partners to return to their initial states where they were before the agreement was signed. In a way you can say that when a rescission agreement is signed, it makes the previous agreement disappear as if it never existed in the first place. A very common example of a rescission agreement is when insurance company finds out that the claim done by a client was false and the fire in their warehouse wasn’t an accident but it was intentional just for the sack of getting insurance money. In this situation, the insurance company can ask the client to return what they received and if they wish, they can file a case in the civil court where both parties face a civil judge and agree to given their consent to the judgment of the court.
How to write a rescission agreement?
Here are some useful Key elements of a rescission agreement that can assist you easily to make your own agreement.
- Name and details of all involved parties
- Name of the party that filed for rescission
- Date on which rescission request was made
- Reasons for rescission a contract
- Details of each reason mentioned in the agreement
- Key steps to be taken to return to the initial stage
- Duration for each party to return what they received
- Signature of all parties involved
- Signature of witnesses and notary public officer
Market practices of rescission agreement:
- Mutually ending a contract without rescission:
Because individuals and organizations never conduct official business without a proper agreement, as soon a party or all involved parties find out that there is ambiguity in an agreement or a fraud was committed by either party or a party mislead the other, the accused party tries to solve the matter out of the court. It is very common for the involved parties to sit together, just decide that the agreement is cancelled and they return whatever they received to the original owner without the matter ever entering into a civil court.
- Signing a mutually agreed rescission agreement:
A more common practice in organizations is that when they want to cancel an agreement, they don’t just cancel it by saying it’s cancelled but they sit together and draft a new agreement known as rescission agreement. This agreement includes the reasons why the previous agreement is cancelled with the mutual consent of both parties and how they both decided to return to their initial stages. If money was exchanged, this agreement can specify how much of it will be returned to the original owner in a specific duration. There is no need for a judge to be presented but a notary public officer is sufficient to legalize the agreement.
- Signing a rescission agreement upon order of court of law:
Another common practice is that as soon a party finds that they were mislead or there is a problem or error in the signed agreement, they immediately approach their lawyer and file a case against the other party. As soon the hearing starts, judge orders the other party to present itself in the court and lawyers from both sides try to prove their clients innocent and right. At the end, whatever judgment the judge makes is considered final. He can state that the contract has some flaws which means it’s not legally binding so both parties should return to their initial stages or he can state that one party did commit fraud and mislead the other party and should return whatever they received returning to their initial state.