Published on:


When you have been fraudulently induced into signing a contract, you may be able entitled to have the contract rescinded. Rescission means that the contract is set aside or annulled, as if it had not existed. When a contract is rescinded, the agreement is extinguished, neither side has any more obligations under the contract and both sides are, as much as possible, restored to their condition prior to entering the contract. 

A contract can be rescinded if the contract was signed based on fraud. The plaintiff has the burden of proving the nine elements of common law fraud: 1) A representation; 2) its falsity; 3) its materiality; 4) the speaker’s knowledge of its falsity or ignorance of its truth; 5) his intent that it should be acted upon by the person and in the manner reasonably contemplated; 6) the hearer’s ignorance of its falsity; 7) his reliance on its truth; 8) his right to rely thereon; 9) his consequent and proximate injury. Hall v. Romero, 141 Ariz. 120, 124, 685 P.2d 757 (App. 1984).

If you prevail in your claim for rescission, you may recover monetary damages in the amount that you paid under the contract. In addition, you also may be entitled to consequential damages in an amount necessary to make you whole, i.e., to place you back in the economic position you had prior to the rescinded transaction.

Rescission may also be an available remedy when negligent
misrepresentation exists. When a person makes a negligent
misrepresentation, they are not saying something that they know to be
false. Rather, they are making a representation about something while
having no reasonable basis for believing it to be true.

“Negligent misrepresentation requires proof that a person, in the
course of a transaction in which he or she has a financial interest,
supplies false information for the guidance of others in their business
transactions, they suffer pecuniary loss caused to them by their
justifiable reliance upon the information, and the supplier of the
information fails to exercise reasonable care or competence in obtaining or communicating the information.” St. Joseph’s Hosp. & Med. Ctr.
v. Reserve Life Ins. Co., 154 Ariz. 307, 312, 742 P.2d 808, 813 (1987),
quoting Restatement (Second) of Torts § 552 (1977).

Finally, rescission may be available based on innocent
misrepresentation. Innocent misrepresentation involves a false
statement. However, the person making the false statement had
reasonable grounds for believing that the false statement was true. In
instances of innocent misrepresentation, a party is entitled to
restitution only, and not consequential damages.

It is essential to act promptly to rescind the contract once you
learn of the factual basis to make a claim for rescission. If you wait
to bring a claim for rescission, then you may ultimately waive your
right to rescission.  Contact a reputable attorney to discuss this and other remedies you might have.