WISCONSIN INTERNATIONAL UNIVERSITY COLLEGE

FACULTY OF LAW

ASSIGNMENT

LAW OF EQUITY

NAME: GEORGE ADANE

STUDENT ID: 1101101

An equitable remedy that annuls or avoids a contract. Rescission is a remedy granted to a

plaintiff in the case of fraud, innocent misrepresentation, or because of some other action on the
defendant’s behalf that amounts to undue influence, unconscionability, or makes the bargain
questionable on some other equitable grounds. Rescission in equity operates to roll the contract
back to the position the parties were in prior to contracting. This is referred to as rescission ab
initio, or “from the beginning.” It is to be distinguished from rescission de futuro, or “for the
future.” The latter terminology is unwisely used to describe the position of a plaintiff who is
entitled to terminate a contract for breach. As an equitable remedy rescission is subject to a
number of discretionary barriers including delay and affirmation. It is also important for the
plaintiff to be able to effect restitutio in integrium. That requires both parties to be restored to
their pre-contractual positions. The degree of complete restoration will vary depending on the
particular underlying cause of action. In the case of fraud a court will be less particular with
giving complete restoration, whereas for an innocent misrepresentation, anything less that
complete restoration will bar rescission.

In its primary and more correct sense, as we, rescission means the retrospective cancellation of a
contract ab initio, as for instance where one of the parties has been guilty of fraudulent
misrepresentation.  In such a case the contract is destroyed as if it had never existed, but its
discharge by breach never impinges upon rights and obligations that have already matured.  It
would be better therefore in this context to talk of termination or discharge rather than
of rescission.

Once these issues are determined in favour of the party seeking to exercise that right, an order
will lie to set aside the contract and the parties put in the position they were in, had the contract
not been entered into.

The parties are thus restored to their original position as if nothing had happened and if
properties have passed same must be returned.

This situation of restoring the parties to their original position is also known as Restitution.

GROUNDS FOR RESCISSION IN EQUITY

The basis on which equity intervenes in each instance are: .

Undue Influence

Actual undue influence in relation to a particular transaction, is proved where: the other party to
the transaction (or someone who induced the transaction for his own benefit) had the capacity to
influence the complainant; the influence was exercised; its exercise was undue; and  its
exercise brought about the transaction.15 But this doctrine is particularly useful to parties
wishing to avoid a contract where they can raise one of the presumptions and thus reverse the
onus of proof. First, there is the presumption of undue influence. Where a transaction takes place
between persons in certain categories of relationship, there is a presumption that it was procured
by undue influence – so that the stronger party is left with the burden of negativing undue
influence. The relationships are: (i) religious adviser and believer; (ii) doctor and patient; (iii)
solicitor.

Fraudulent Misrepresentation

Where one of the parties to the contract was induced to enter into the contract by fraud and
misrepresentation, rescission will lie.
Thus where A makes a false statement to B knowingly, or without belief in its truth or recklessly
without caring whether it is true or false with the intent that it should be acted upon and is indeed
acted upon by B to his detriment, A will be liable for fraudulent misrepresentation and it will be
a good ground for rescinding the contract as was held in Derry v Peek.

Unconscientious Bargains

This category of equitable fraud is sometimes referred to as unconscionable conduct in the

narrow sense and sometimes, colloquially, as the Amadio defence. The complainant needs to
establish: (a) that the complainant was under “a special disability in dealing with the other party
with the consequence that there was an absence of any reasonable degree of equality between
them”; and (b) “that disability was sufficiently evident to the stronger party to make it prima
facie unfair or ‘unconscientious’ that he/she procure, or accept, the weaker party’s assent to the
impugned transaction in the circumstances in which he/she procured or accepted it”, at which
point that onus is cast upon the stronger party to show that the transaction was fair, just and
reasonable.

Innocent Misrepresentation

At common law misrepresentation will be a ground for rescission only if it is fraudulent. In

equity a person’s entitlement to rescind for misrepresentation does not depend on any intention
to deceive. It is regarded as fraudulent (in the equitable sense) for a defendant to hold a plaintiff
to a bargain which has been induced by representations of the defendant which were untrue.
There must be: a misrepresentation; which produced a misapprehension on the part of the
representee; which misapprehension was one of the reasons which induced the representee to
enter into the contract; an intention on the part of the representor that the representee act in the
way he/she in fact did.