AZ Common Law Causes of Action RESCISSION (2011)

• Jurisdiction: Arizona

RESCISSION

Elements

“In the law of contracts it seems to be the rule that where there is an entire, or even a substantial, failure of the consideration, the contract may be rescinded. The contract may also be rescinded and terminated where the failure of consideration results from impossibility of performance or by impossibility of performance alone. . . . It is undoubtedly the rule that where rescission is sought, the party wishing to rescind must place the opposite party in status quo.” Fish v. Valley Nat’l. Bank of Phoenix, 64 Ariz. 164, 171-72, 167 P.2d 107, 112 (1946).

“Rescission and reformation are claims that seek relief based on fraud or mistake. Such claims do not accrue until the discovery by the aggrieved party of the facts constituting the fraud or mistake.” Long v. City of Glendale, 208 Ariz. 319, 326, ¶ 17, 93 P.3d 519, 526 (App. Div. 1, 2004) (internal quotation omitted).

“The remedy of rescission, like restitution, requires a vital breach of contract, representing a substantial failure of consideration.” Seitz v. Indus. Comm’n, 184 Ariz. 599, 603, 911 P.2d 605, 609 (App. Div. 1, 1995).

“A rescission at law is one which occurs outside of and without the assistance of the courts. If the plaintiff has adequate substantive grounds for avoiding the transaction, his notice to the defendant that he has done so, accompanied by restoration to the defendant of benefits received by the plaintiff in the transaction, will itself amount to a rescission. While the plaintiff may require the assistance of the courts in recovering from the defendant what he gave under the contract, the contract is nevertheless rescinded prior to the commencement of that action by virtue of the plaintiff’s tender and the defendant’s acceptance of the benefits received under the contract from the defendant.” Dewey v. Arnold, 159 Ariz. 65, 69, 764 P.2d 1124, 1128 (App. Div. 2, 1988) (internal citations omitted).

“Arizona courts adhere to the rule that a contract may be mutually rescinded. Such rescission is of course a question of intent to be ascertained from the facts and circumstances of the transaction from which rescission is claimed. Rescission in Arizona may be express, but it can also be inferred from the parties’ conduct. In fact, where the actions of a party to the contract are inconsistent with the contract and acquiesced in by the other party, the contract will be deemed rescinded.

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For mutual rescission to be given effect, all parties to the contract must...