RESCISSION OF CONTRACTS :

Section 27 deals with Rescission of Contracts. “Rescission” means putting an end to a contract which is still operative and making it null and void ab initio. It does not apply to void contracts. Section 27 states the principle upon which rescission can be ordered. A person suing for rescission cannot, in the alternative sue for specific performance but a person suing for specific performance can sue for rescission.

Sub-section (1) lays down that any person interested in a contract may sue to have it rescinded, and such rescission may be adjudged by the Court in any of the following cases, namely – (a) where the contract is voidable or terminable by the plaintiff; (b) where the contract is unlawful for causes not apparent on its face and the defendant is more to blame than the plaintiff. Sub-section (2) lays down that notwithstanding anything contained in Sub-section (1), the Court may refuse to rescind the contract – (a) where the plaintiff has expressly or impliedly ratified the contract; or (b) where, owing to the change of circumstances which has taken place since the making of the contract (not being due to any act of the defendant himself), the parties cannot be substantially restored to the position in which they stood when the contract was made; or (c) where third-parties have, during the subsistence of the contract, acquired rights in good faith without notice and for value; or (d) where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract. The explanation provides that in this Section, “contract” in relation to the territories to which the Transfer of Property Act, 1882, does not extend, means a contract in writing.

“This specie of specific relief is the reverse of specific performance. In one case the relief is granted by enforcing the performance of a contract which binds the parties, and the other by discharging him when it is not just to bind him” (Banerjee). So the equitable relief by way of rescission is exactly opposite of specific performance. Here, the contract is put to an end and is made null and void where by the contractual obligations also come to an end. Section 27 provides ground to the aggrieved party to rescind a contract without obtaining consent of the other party.

Under clause (a) where a contract is voidable or terminable by the plaintiff, he may rescind it. The contract may become voidable or terminable due to fraud, undue influence, misrepresentation or coercion.

Any person interested in a contract may sue to have it rescinded. Hence a suit may be brought by a third party whose interests are affected by the contract.

In case of a rescission of a contract, the Court may, in its discretion, require the party to whom such relief is granted to make any compensation to the other party. The main object of this relief is to put both the parties in their original positions. If a plaintiff fails to get specific performance of a contract in writing, he may get it rescinded and delivered up to be cancelled.