Legal Definitions - Rescission

Definition: Rescission means to cancel a contract. This can happen in different ways:

• Unilateral rescission: when one party cancels the contract because the other party broke an important part of the agreement.
• Mutual rescission: when both parties agree to cancel the contract and no one has to do anything else.
• Court-ordered rescission: when a court decides that a contract is not valid because it goes against the law or public policy.

For example, if you hire a contractor to build a house and they don't finish the work on time or do a bad job, you might be able to cancel the contract and get your money back. This is unilateral rescission. If you and the contractor both agree that they won't finish the work and you won't pay them any more money, that's mutual rescission. And if a court decides that a contract is illegal, like if you sign a contract to sell drugs, the court can order rescission and the contract will be cancelled.