Mode of communicating or revoking rescission of voidable
The rescission of a voidable contract may be communicated or revoked in the same
manner, and subject to the same rules, as apply to the communication or revocation
of a proposal.
Rescission is always subject to the condition that the party seeking rescission must
be in a position to restore the benefits he may have obtained under the contract.
Section 64 requires him to do so.
Consequences of rescission of voidable contract:
When a person at whose option a contract is voidable rescinds it, the other party
thereto need not perform any promise therein contained in which he is promisor.
The party rescinding a voidable contract shall, if he have received any benefit there
under from another party to such contract, restore such benefit, so far as may be‟ to
the person from whom it received.
Thus a person avoiding a loan bond on the ground of undue influence has to
pay back the loan, the court only reduces the interest to what may seem to be
reasonable in the circumstances. A corporation supplied, after taking payment in
advance, a quantity of rapseed oil which turned out to be mixed with water, the
corporation had to refund the money with interest.
Even when the party seeking rescission is not in a position to restore to the
defendant his status quo ante, the court may allow rescission by doing what is
practically just in circumstances. Thus, where a wife wanted to set aside on the
ground of misrepresentation the separation deed made with her husband, under
which she had already received some maintenance, but was not able to restore the
money, the court allowed her relief holding that the money may be set-off against
costs to which she was otherwise entitled. SWINFEN EADY LJ said: “The general
rule is that as a condition of rescission there must be restitution in integrum, but at
the same time the court has the full power to make all just allowances. It was said
by Lord BLACKBURN in Erlanger v New Sombrero Phosphate Co, that the
practice had always been for a court of equity to give relief by way of rescission
whenever by the exercise of it power it can do what is practically just, though it
cannot restore the parties precisely in the state that they were in before the contract.
On the other hand, where both parties had spent money on the property in terms of
the contract in such manner that restitution was not possible, rescission was not
allowed even though there was innocent misrepresentation on the part of the seller
of the property.
The position is thus summarized by Treital.
“As in cases of misrepresentation, the party seeking rescission must restore
benefits that he has obtained under the contract, but he is not required to make
precise restitution: the principle of allowing rescission for misrepresentation so
long as equity can achieve a result that is „practically just‟ applies also where
rescission is sought on the ground of undue influence”
Following this position of law in a case, it was held that where a party received
nothing under the mortgage which was set aside on the ground of undue influence,
there was nothing for him to make restitution.
Damages for innocent misrepresentation
A person who is the victim of a fraud is entitled to sue for damages, fraud
being a tort also. But the victim of an innocent misrepresentation was not allowed
to recover any compensation, Liability in tort for negligent or innocent
misrepresentation is still groaning for recognition. However, much of the
sufferings of the victims of innocent misrepresentations have now been relieved by
the (English) Misrepresentation Act, 1967. The Act contains the following main
(1)A person who has entered into a contract on account of a
misrepresentation will have the same right to recover compensation
for loss, if any, caused to him as if the misrepresentation had been
made to the time of the contract believe that the facts represented were
(2)When it is alleged in any proceedings that the contract ought to be or
has been rescinded, the court may, instead, declare the contract to be
subsisting and award damages in place of rescission, if it is equitable
to do so.
(3)Provisions in the contract which exclude or restrict liability would be
of no effect, unless they are fair and reasonable in the circumstances
of the case.
The vendor of a property relied on her husband to deal with her business
affairs. The husband stated to the purchaser that to the vendor‟s knowledge there
was no dispute with any neighbor over boundary. In fact there was a dispute of this
kind, though the husband did not know it. His statement amounted to an innocent
misrepresentation. The purchaser was allowed rescission and refund of deposit.
He was further entitled under Section 2(1) to an inquiry into damages
suffered arising out of the loss of interest for the period between the date of deposit
and its placement in an interest-earning account.
Under the Indian Contract Act this type of relief is provided under Section
Party rightfully rescinding contract entitled to
A person who rightfully rescinds a contract is entitled to compensation for
any damage which he has sustained through the non-fulfillment of the contract.
A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two
nights in every week during the next two months, and B engages to pay her 100
rupees for each night‟s performance. On the sixth night, A willfully absents herself
from the theatre, and B, in consequence, rescinds the contract. B is entitled to
claim compensation for the damage which he has sustained through the non-
fulfillment of the contract.
(1)Official Receiver v Jugal Kishore
Under an agreement of certain sale of goods, the plaintiff received through a
bank the railway receipts supposed to represent the goods and obtained
them from the bank after paying Rs 15,000. The amount was sent to the seller‟s
account at his place of business. Meanwhile the plaintiff discovered that the
railway receipts were bogus and immediately informed the bank not to part with
the amount which was accordingly withheld. But before the plaintiff could inform
either the fraudulent seller or file a suit for rescission an insolvency judge ordered
the bank not to pay the amount on either party.
The plaintiff then filed a suit for declaration that he was entitled to his money.
The full bench was of the view that the plaintiff had parted with the money under a
fraud. Thus the money came into the insolvent‟s account under a defeasible title
and the plaintiff had defeated it when he directed the banker to stop payment which
was done before the insolvency judge‟s order. Even if he had rescinded by filing
the suit, he was entitled to the money, because he had nothing to affirm the
Section 66lays down the way in which the communication of rescission is to be
It was held that by informing the police and the Association the plaintiff had done
an overt act clearly showing his intention to rescind and the sale of the car after
rescission could not convey to the defendant a good title. To hold otherwise, said
SELLERS LJ “would involve the defrauding party, if skilful enough to keep out of
the way, would deprive the other party to the contract of his right to rescind. That
another innocent party or parties may suffer does not justify imposing on a
defrauded seller an impossible task. H e had to establish clearly and unequivocally
that he terminates the contract and is no longer to be bound by it. If he cannot
communicate his decision he may still satisfy a judge that he had made a final and
irrevocable decision and ended the contract.