RESCISSION OF CONTRACTS
The rescission of contract necessarily constitutes a bar to its performance by either of the party to it (Chapter XXIV).
Any person on whom the burden of a contract has been imposed by means of fraud or illegality or something equivalent which makes the contract either void or voidable may ask the court to declare the contract as non-binding.
This is rescission, that is, getting rid of a contract. Section 27 accordingly provides that the court may allow the relief of restriction on the following cases:
1) Where the contract is voidable or terminable by the plaintiff;
2) where the contract is unlawful for causes not apparent on its face and the defendant is more than to blame.
Situations wherein the relief of rescission is not available:-
1. Affirmation
The plaintiff loses the right of rescission when on becoming aware of his right he chooses to ratify the contract. Once the contract is affirmed it cannot afterward be avoided. Affirmation may be express or implied.
2. Where restitution not possible
The right of rescission is also lost where the position of the parties has been altered to such an extent that they cannot be put back to their original status.
3. Intervention of third parties
Where the rights of third parties have intervened, rescission cannot be allowed to the prejudice of such rights.
4. Severance
Rescission is not allowed where the plaintiff is seeking rescission of only a part of the contract and that part is not severable from the rest of the contract.
Section 28 enables the court to put an inbuilt remedy of rescission in a decree of specific performance.
Where a decree of specific performance has been passed in respect of a contract for the sale or lease of immovable property, but the party to whom such relief has been granted does not pay the price within the time delimited, the seller may ask the court for rescission.
The court will direct the purchaser or lessee, if he has already taken over possession, to restore it to seller and also to pay him to rent for the period during which he enjoyed the benefits of possession.
Where justice so requires the court may order a refund of the earnest money, if any, paid by the vendee or lessee. Where, on the other hand, the vendee or lessee has deposited the money as direct by the court, he may be allowed any relief as may seem just to the court in the circumstances.
Relief of rescission of contract can be sought by a transferee pendente lite. It can also be grant after the execution of the sale deed.
Alternative prayer for rescission in suit for specific performance [S. 29]
The plaintiff may in a suit for specific performance make a prayer that if such relief cannot be granted, the contract may be rescinded.
Extension of time
Where the court, while ordering specific performance in favour of the plaintiff, directed him to pay the balance amount within a specified date and that, on his failure to do so, his case would be dismissed, it was held on his failure to do so, that the court could grant him extension of time.
Contract not automatically extinguished on decree of specific performance
The contract between the parties is not extinguished on passing of decree of specific performance. The court does not lose its jurisdiction, nor does it become functus officion. The decree of specific performance is in the nature of a preliminary decree.
The suit is deemed to be pending even after the grant of such decree. The court retains its control over the entire matter even after the decree.
Rescission and Equity
Section 30 lays down that the court may require parties rescinding to do equity.
30. Court may require parties rescinding to do equity- On adjudging the rescission of a contract, the court may require the party to whom such relief is granted to restore, so far as may be, any benefit which he may have received from the other party and to make any compensation to him which justice may require.
It is a maximum of law that "he who seeks equity" "must do equity" in the transaction in respect of which relief is sought. So while decreeing rescission the court might direct not only payment of compensation to the defendant but also restoration of any benefit received by the plaintiff under the contract.
A party seeking specific relief may at the same time ask that if specific performance cannot be allowed, the contract may be ordered to be rescinded.
RETIFICATION OF INSTRUMENTS [S. 26]
Section 26 of the Specific Relief Act, 1963 provides remedy for rectification of instruments.
In the matter of rectification, the true question, is what was the intention of the parties at the time of its execution and not what the parties intentionally omitted.
The plaintiff must establish that the alleged intention to which he desires the document to be made conformable, continued concurrently in the minds of all parties down to the made conformable, continued concurrently in the minds of all parties down to the time of its execution.
For, if the parties after an agreement changed their minds and it is their changes intention that is embodied in the instrument, there is no ground for rectification. What is done on purpose, is obviously not done by mistake.
Essentials to be proved
1) That there was a mutual mistake or fraud, and
2) that the instrument on that account did not truly express the intention of the parties.
Mistake
The mistake to form a ground for the relief of rectification must be mutual and not unilateral. A mistake on one side may be a ground of defence or a ground for rescinding a contract, but not for correcting or rectifying an instrument.
The mistake may be either of fact or of law although the court of equity will not generally grant relief against a mistake of law, except where the mistake results in an inequitable result.
In the case of a gift deed, only the donor may seek its rectification. In other cases, it is permissible only to the parties to the contract and none else.
