Suggestion Law Academy

Britannia University

Class Assignment

AN ASSIGNMENT ON

The Rescission of Contract

Course title

Law of Specific Relief and Equity

Course Code: LLB 108

SUBMITTED TO

Adv. Quazi Md. Shah Paran

Lecturer, Department of Law

Britannia University, Cumilla

SUBMETTED BY

Name: Junaid Hasan

ID: 2101040005

Spring-2021, Batch-24

Department of Law

Britannia University, Cumilla

Date of submission: 19/04/2022

The Recession of Contract means, Cancellation of a contract. Rescission may be unilateral, as when a party rightfully cancels a contract because of another party’s material breach. Rescission can also be mutual, as when the contracting parties agree to discharge all remaining obligations. Rescission is when a contract is rendered null and void, and so is no longer recognized as legally binding. The courts can free non-liable parties from their agreed obligations and, when possible, will effectively seek to restore them to the position they were in before the contract was signed. Rescission involves canceling a contract and treating it as though it never existed by ensuring that all its effects are eliminated. To return all parties to their original state, things that were exchanged, such as money, must be returned. Rescinding a contract may be an option if there is proof that there was a material error in the contract. Evidence of fraud, mutual errors, lack of legal or mental capacity, duress and undue influence, or one party not fulfilling its obligation can also lead contracts to be voided. Laws addressing rescission vary from state to state. However, for certain contracts, such as those exchanged between lenders and consumers, rescission may occasionally be federally mandated. According to Snell- The word of “Rescission” means the putting an end to a contract and making it null and void ab initio. Recessions not a judicial remedy but the fact of party entitled to rescind. It’s a right which a party to transaction sometimes has to set the transaction aside and restore to its former position.

Under Section 35 of specific relief act discussed about when rescission may adjudged

Any person interested in a contract in writing may sue to have it rescinded and such rescission may be adjudged by the court in any of the following cases:

•  Where the contract is voidable or terminable by the plaintiff
•  Where the contract is unlawful of causes not apparent on its face and the defendant is more to blame than the plaintiff
• Where a decree for specific performance of a contract of sale, or of a contract to take a lease, has been made, and the purchaser or lessee makes default in payment of the purchase-money or other sums which the Court has ordered him to pay. When the purchaser or lessee is in possession of the subject-matter, and the Court finds that such possession is wrongful, the Court may also order him to pay to the vendor or lessor the rents and profits, if any, received by him as such possessor In the same case, the Court may, by order in the suit in which the decree has been made and not complied with, rescind the contract, either so far as regards the party in default, or altogether as the justice of the case may require.

Example: A, an [Advocate], induces his client B, a Hindu widow, to transfer property to him for the purpose pf defrauding B’s creditors. Here the parties are not equally in fault, and B is entitled to have the instrument of transfer rescinded.

The plaintiff in the suit for specific performance of contract are deemed to have forsaken their right to have a deed of sale from defendant Rajeshwar when they received his offer to take back from him the advance purchase- money but made no response thereto. Even when Rajeshwar pays back the advance purchase-money with compensation, the co is not terminable at his option- the option lies with the plaintiff, not with defendant. (Rajeshwar Habibur Rahman vs Jogiswar Roy 44 DLR (AD)[1]

Who may apply?

• Any person interested in the contract can apply for the recession of a contract. The expression person interested, includes the heir of the party to the contract (AIR 1927 Bom.381).[2]
• Any parties of contract can be file suit for recession.
• If any person who has been benefit or get interest gain in the contract.
• Contract shall be created damage (4 Bom.29).[3]
• Hindu joint family’s manager and third party made a contract by act of fraud and harmful to another person.

The limitation Act 1908, Section 114 has been proved limitation of filing suit time has one year. Amendment in 1 July, 2005. Before amendment limitation time has 3 years. In general court accept recession of a contract when parties file suit soon as soon possible and don’t waste of time (AIR 1930 Sind.66) [4]

Ground for conceding the application of rescission

The following to cases the application of rescission may be granted

• When the contract is voidable or terminate by the plaintiff.
• When the contract is unlawful for causes not apparent on its face, and the defendant is more to blame than the plaintiff.
• Court provide specific decree for sale or lease but they cannot paid price.
• Partial contract has been rescission (AIR 1928 Sind. 61).[5]
• Any contract relating to minor and when minor gains, majority that time.
• Against morality and public policy
• By mistake create a contract
• Intension to gain some benefit to certain time

Grounds for refusing the application of rescission

The following condition the court may refuse to rescind a contract

• When the plaintiff has expressly or impliedly ratified the contract.
• Where, owing to the chance or circumstances which has taken place since the making of the contract (not being due to any act of the defendant himself) the parties can not be substantially restored to position in which they stood when the contract was made.
• Where third parties have, during the subsistence of the contract, acquired right in good faith, without notice and for value.
• Where only a part of the contract is sought to be rescinded and it in not severable from the rest of the contract

Note: Rescission of a contract in writing cannot be adjudged for mere mistake unless the party against whom it is adjudged can be restored to substantially the same position as if is the contract had been not made. Specific relief act section 36 has to says, this section only deal with rescission of contract and its dose not deal with claim advance money for voidable contract (AIR 1917 Cal. 786 DB). [6]

Alternative prayer for rescission in suit for specific performance: In section 37 of Specific Relief Act 1877 provide, a plaintiff instituting a suit for the specific performance of a contract in writing may pray in the alternative that, if the contract cannot be specifically enforced, it may be rescinded and delivered up to be cancelled; and the Court, if it refuses to enforce the contract specifically, may direct it to be rescinded and delivered up accordingly.

Specific Relief Act have been talked about in the specific performance of compensation as a law prayer.  Section 37, if you refuse to pay, you can order.  But you have to pray for it.  Section 19 of the Specific Relief Act provides for alternative request for termination of contract in case of performance of specific contract and in case of specified performance of contract so as to seek compensation as an alternative in case of specific performance of contract.  Section 37 of this Act provides for termination or termination of the contract as an alternative in case of execution.  According to section 37, if the court refuses the order to perform certain functions of the contract, the court may revoke or revoke the contract.  However, the plaintiff will have to cancel the contract as an alternative to the specified performance.  According to Section 37 of the Specific Relief Act, in order for the court to order a written extension, arrangements have to be made to restore the parties.  Because, it demands justice.  In case the seller of the sales contract fails to complete the sale, the buyer may consider the defect to be void.  He can apply for a return on equity, or a refund of the money he paid to the other party under a failed contract under the law.  He may strike the contract and (a) claim compensation for breach of contract or (b) seek redress for certain actions (AIR 1937 Nag. 243)[7].

High Court decision:

12 BLC 505[8]-The instant suit is not a suit for simple declaration of the impugned order of dismissal as illegal and inoperative but also for a declaration that the plaintiff is in her service which is very much a consequential relief and if decree is passed by the Court, the same is very much executable. Failure and/ or frustration of the ancillary/ auxiliary relief cannot frustrate the entire suit and cannot result in dismissal of the suit if the plaintiff is otherwise entitled to a decree of her substantive relief. The prayer of the plaintiff made in sub-paragraph @Kha”, may become infructuous due to an appointment to her post before filing the suit but for that reason her suit for declaration as prayed in sub-paragraph ‘Ka’ cannot fail if she is otherwise entitled to get a decree to that effect which is very much effective and exclusive.

Section 38 of Specific Relief Act provides Court may require party rescinding to do equity: On adjudging the rescission of a contract, the Court may require the party to whom such relief is granted to make any compensation to the other which justice may require.

Scope and Objectives of Section 38: Section 38 of the Specific Relief Act states that the court shall, on behalf of the party in favor of which the remedy for termination of contract be granted, order compensation to the other party in the need of justice. The provision for compensation under this section is based on a principle of equity (Maxim). The principle is, the seeker of justice must be fair (He who seeks equity must do equity).  Section 38 complements Section 36 of the Specific Relief Act.  Article 38 calls for the return of the other party to the former state of the agreement.  Section 38 calls for termination of the contract through financial compensation to the other party.  Before ordering a contract run, the court will order the contracting party to return or compensate the benefit he has received from the other party.  Such provision has been made in Section 65 of the Contract Act.  The court may also order compensation in the case of a contract entered into with a minor.  Under this section, the plaintiff cannot sue for contract and compensation at the same time.  According to section 38, arrangements are made to compensate the person against whom the decree of revocation of contract is issued.  If the termination of the contract is due to the conduct of the respondent then the court will not give much importance to the question of compensation to him.  The amount of compensation depends on the discretion of the court.  The court will determine the amount of compensation according to the specific circumstances of each case.  In case both parties to the contract are innocent, the amount of compensation must be considered. Section 38 contains the same provisions as section 41.  These two sections undoubtedly empower the court to exercise discretion in granting compensation to the other party for the sake of justice (AIR 1933 All. 371).[9]

 Contract executed by a minor and cancel the contract executed with a minor: If a person enters into a contract with a minor knowing that he is a minor, he will not be able to claim any compensation under section 38, the equity is not in his favor (32 P.R 1904)[10].  In the case where the mortgagee’s attorney has taken a mortgage on the mortgagee’s juvenile, it has been decided that the mortgagor is sued.  Will be entitled to any compensation as per Sections 38 and 41 of the Act. The mortgagee will not be entitled to specific remedy war knowing of juvenile delinquency (26 Cal 381)[11]

Contract by lunatic: Compensation under section 38 is not required to cancel a contract executed by a lunatic. In case the seller is insane, the buyer cannot get back the exchange price charged by him (AIR 1917 Cal, 566 DB).[12]

Limitation period: The time limit for termination or cancellation of contract is 1 (one) year.  A case for cancellation of the contract has to be filed within 1 (one) year from the date of notification of the need to cancel or cancel the contract.  Prior to July 1, 2005, the term of the statute of limitations was 3 (three) years as per section 114 of The Limitation Act.  If a case has been filed before July 1, 2005, the period of limitation will be 3 (three) years.

 Failure to disburse money within the stipulated time: According to section 38 of the Specific Relief Act, the party who is ordered to cancel the contract is instructed to pay compensation.  There is a time limit for the payment of this compensation, in which case the party terminating the contract must return the benefit earned.  Failure of the contracting party will not result in dismissal of the case.  Due to the failure of the plaintiff to disburse the money in time, the other party may execute the decree (AIR 1938 Rang. 408 DB).[13]

Conclusion

We have already know 35,36,37,38 of The Specific Relief Act 1877 what has been discussed. This sections discussed about rescission of contract, who made contract, what are condition to a plaintiff can file a suit, which person can’t file suit and also limitation period to file a suit. Court provide remedy by performance of contract.

---

[1] Mst. Masuda Akter Jahan, “The Specific Relief Act & The Trust Act” (first edition) p.66

[2] Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 232

[3]   Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 232

[4]   Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 232

[5]  Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 231                                                 

[6]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 234                 

[7]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 235

[8]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 235    

[9]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 236    

[10]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 236   

[11]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 236

[12]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 237

[13]    Md. Abdur Rahman Hawladed, “Analysis of Specific Relief Act” (third edition) p. 237