§ 1. 2. CHAPTER I DEFINITIONS AND GENERAL PRINCIPLES Rescission Defined. In Roman and Modern Civil Law. 3. To What Classes of Obligations Rescission Applies. 4. Voidability as an Element of the Right of Rescission. 5. Rescission and Breach of Contract Distinguished. 6. Abandonment or Repudiation of Contract Distinguished. 7. Rescission and Forfeiture Distinguished. 8. Rescission by Substitution of New Contract. 9. 10. 11. Modification or Alteration of Contract Distinguished. Rescission and Reformation Distinguished. 12. Rescission as the Converse of Specific Performance. 13. Parol Rescission of Written Contract. 14. 15. 16. Grounds Required to Support Unilateral Rescission. Same; California, Montana, Oklahoma, North Dakota, 17. Same; Georgia. 18. Same; Alabama. 19. Same; Louisiana. § 1. Rescission Defined.-To rescind a contract is not merely to terminate it, but to abrogate and undo it from the beginning; that is, not merely to release the parties from further obligation to each other in respect to the subject of the contract, but to annul the contract and restore the parties to the relative positions which they would have occupied if no such contract had ever been made.1 Rescission necessarily involves a repudiation of the contract and a refusal of the moving party to be further bound by 1 Powell v. F. C. Linde Co., 29 Misc. Rep. 419, 60 N. Y. Supp. 1044; Hurst v. Trow Printing & Bookbinding Co., 2 Misc. Rep. 361, 22 N. Y. Supp. 371. Etymologically, to "rescind" is to sever or cut off or cut apart. The metaphor involved in the word "obligation" is that of a binding up or tying together, as, where a party "obliges" himself in a bond, the figure is that of his being bound to its performance as with cords, and so the "obligation" of a contract is the union of the parties with respect to its mutual terms and conditions, as if they were physically tied to each other. The "rescission" of an obligation is therefore the severance or cutting apart of this metaphorical bond. it. But this by itself would constitute no more than a breach of the contract or a refusal of performance, while the idea of rescission involves the additional and distinguishing element of a restoration of the status quo, that is, an offer by the moving party to restore all that he has received under it, with a demand for the similar restoration to him of all that he has paid or given under it, and, in effect, a mutual release of further obligations. As to the manner in which rescission is effected, a right to take this action may be reserved to either or both of the parties in the contract itself, and it may then be exercised without other grounds for it than the mere will of the party rescinding, or the occurrence of such conditions as may be stipulated in the contract. Such a reservation may be effected by the use of any suitable language, without the necessity of employing the technical word "rescind." There may also be rescission by the mutual agreement of the parties to the contract, which is in effect the discharge of both parties from the legal obligations admittedly existing thereunder, by a subsequent agreement made before the complete performance of the original contract. Or one of the parties may declare a rescission of the contract, without the consent of the other, or against his protest, if a legally sufficient ground therefor exists, such, for instance, as fraud, false representations, mistake, duress, or infancy. Or, finally, a party believing himself entitled to have the contract abrogated and to have himself restored to his former position may invoke the aid of a court of equity and obtain a decree for the rescission of the contract and, in proper cases, for the cancellation of the instrument evidencing it. 2 Thus, where the purchaser of goods fails to accept the same, and the seller refuses to take them back, and sues for the price, there is no rescission. The act of refusing to accept an article is not a rescission of the contract, but one of insistence on it. Potsdamer v. Kruse, 57 Minn. 193, 58 N. W. 983. Reiger v. Turley, 151 Iowa, 491, 131 N. W. 866; Ballou v. Billings, 136 Mass. 307; Merrill v. Merrill, 103 Cal. 287, 35 Pac. 768, 37 Pac. 392; Jones v. McGinn, 70 Or. 236, 140 Pac. 994. 4 Seanor v. McLaughlin, 165 Pa. 150, 30 Atl. 717, 32 L. R. A. 467. Holland v. Rhoades, 56 Or. 206, 106 Pac. 779; J. K. Armsby Co. v. Grays Harbor Commercial Co., 62 Or. 173, 123 Pac. 32. § 2. In Roman and Modern Civil Law. The law of Rome recognized a right of rescission of contracts and a method of effecting it which were not essentially different from those accorded by the principles of English equity jurisprudence. The procedure was denominated "restitutio in integrum," that is, "making whole," or the restoration to the injured party of what he had paid or lost under the contract. The tendency of the Roman law was to regard this restoration as the principal matter and the rescission of the contract as an incident of it, while the English law treats the rescission of the contract as the relief to be afforded in a proper case, and the matter of restoration as a condition or consequence of it. But in the Roman law, as in the English law, the appeal was to equity and it was necessary to show equitable grounds for the interference of the court (such as fraud, duress, mistake, or infancy) and also that the complaining party had acted promptly and was not chargeable with laches, that he had suffered a substantial injury in consequence of an act or omission without his own fault, and that he had no adequate remedy at law." These fundamental principles have been carried over into the substantive law of most of the countries of continental Europe, and have also, to a considerable extent, colored the jurisprudence of those of our States whose legal institutions, in their formative period, were affected by the French or the Spanish law. Thus, in California, it is said: "In Spanish law, nullity is divided into absolute and relative. The former is that which arises from a law, whether civil or criminal, the principal motive for which is the public interest; and the latter is that which affects only certain individuals. Nullity is not to be confounded with rescission. Nullity takes place when the act is affected by a radical vice, which prevents it from producing any effect, as, where an act is in contravention of the laws or of good morals, or where it has been executed by a person who cannot be supposed to have any will, as a child under the age of seven years or a madman. Rescission is where an act, valid in appearance, nevertheless conceals a defect which may make • Mackeldey, Modern Roman Law, §§ 220-233; Dig. 4, 1. |