How to Rescind a Contract: Legal grounds and Next steps

When you enter into a contract, you expect each party to stick to their promises. But sometimes, even if you have done your part, the other party may not follow through. If that happens, you may wonder how to get out of an unfair deal. This process is called “rescission”. In this article, we consider what rescission means, how to rescind a contract, when you can use it, and what happens next, as well as give practical advice on what initial steps you can take if you are in this situation.

What is Rescission?

Rescission unwinds a contract as if the contract had never existed. This is different from ending a contract by terminating it. Rescission aims to put both you and the other party back into the positions you were in before the agreement was made, essentially erasing everything that has happened since the contract was entered into.

This can be a complex area of law, but the key idea is to protect you from being bound by a contract that was created under unfair, misleading, or flawed circumstances.

Grounds for Rescission

To successfully rescind a contract, you need to show that there was a serious problem with how the contract was made. Below we explore six of the most common grounds that may give you the right to walk away from a contract entirely.

1. Misrepresentation or fraud
2. Mistake
3. Duress or undue influence
4. Breach of contract
5. Lack of capacity
6. Illegality

Misrepresentation or Fraud

One of the most common reasons you might want to rescind a contract is if you were misled into signing it. This often happens when the other party made a false statement of fact that you relied on when deciding to go ahead with the agreement.

To successfully argue misrepresentation, you’ll usually need to show:

• The statement must have been a factual one: not just opinion or sales talk. For example, being told “This car has only done 50,000 miles” is a statement of fact that can be verified or disproved. In contrast, saying “This is the best car on the market” is likely to be treated as opinion.
• It must have been made before or at the time you entered into the contract: anything said afterwards generally won’t count.
• You must have relied on it: meaning that you believed the statement and it influenced your decision to proceed. If you already knew it wasn’t true, or didn’t pay much attention to the statement, it will be harder to show reliance.
• It must have encouraged you to enter the contract: the misrepresentation needs to have played a real role in your decision. Ask yourself: if the statement hadn’t been made, would you still have gone ahead?

If you can tick all these boxes, you may have grounds for rescission based on misrepresentation.

Fraud is a more serious type of misrepresentation, where the person making the false statement knew it was false, or didn’t care whether it was true or not. For example, if the car seller knew the car had been in a major crash and deliberately lied about it to make the sale, that would be fraud.

In either case, the court will look at whether a false statement of fact was made, whether it played a significant role in your decision, and whether you genuinely relied on it. In the case of fraud, the court will also consider whether the person intended to deceive you.

Ultimately, the court needs to be satisfied that you were genuinely misled before it will agree to set aside the contract.

Mistake

Sometimes, a contract is based on a serious misunderstanding, either by both parties, or just one.  If that misunderstanding goes to the heart of the agreement, you may be able to rescind the contract.

There are two main types of legal mistakes:

• Common mistake: where both you and the other party make the same incorrect assumption about something essential to the contract. For example, you both believe a car has done only 2,000 miles, but in fact it has done 20,000 miles. A common mistake has to be a misunderstanding so fundamental that, had the truth been known, you likely wouldn’t have entered into the contract at all.
• Unilateral mistake: where only one of you is mistaken, but the other party knows about your mistake and does nothing to correct it. For example, if you buy a car because you believe it has a low mileage, and you mention that to the seller. If the seller knows you are mistaken, but stays silent, they are taking unfair advantage of your mistake.

Courts are generally cautious when it comes to rescinding a contract based on mistake. You’ll need to show that the mistake was truly fundamental and something that changes the very nature of the agreement. For example, if the goods or service you agreed to buy don’t actually exist, or if both parties were wrong about something crucial that makes the deal completely different from what was intended, the court is more likely to allow rescission.

Duress or Undue Influence

If you were pressured, manipulated, or even threatened into signing a contract, you may have the right to walk away from it. The law protects you from being bound by agreements made without your genuine free will.

There are two main ways this kind of pressure can arise:

• Duress: this involves threats or actual violence. For example, if someone threatens to or physically harms you or your family, or threatens to damage your property or business, unless you sign a contract. The key is that you felt you had no real choice.
• Undue Influence: this happens when someone you trust uses their position to push you into a decision that benefits them. It’s common in relationships where one person has authority or influence over the other (such as doctor and patient). For instance, if you rely heavily on someone and they pressure you into selling your car to them for far less than it’s worth, that could be undue influence.

To prove duress or undue influence, you’ll usually need to show evidence of what happened. This could include:

• Records of threats, like texts, emails, or witness statements
• Proof of a relationship of trust or dependence
• Signs you didn’t have the chance to get independent legal or financial advice
• Contract terms that are clearly unfair or one-sided (for example, selling something valuable for a very low price)

The more supporting evidence you can provide, the stronger your case will be.

When reviewing your situation, the court will want to know whether you truly had a choice. For duress, they’ll look for illegitimate pressure that left you with no practical alternative. For undue influence, they’ll assess whether there was an abuse of trust that stopped you from thinking independently and making your own decision.

Breach of Contract

Most of the time, if someone breaks a contract, the usual remedy is to claim damages (financial compensation). But in more serious cases, where the breach is so major that it defeats the whole point of the contract, you may be entitled to rescind it entirely.

Imagine you hire a builder to construct an extension on your home. You agree on clear plans, a firm deadline, and you pay a large deposit. But after just laying the foundations, the builder walks off the job and never comes back. As a result, the work can’t be finished on time, or at all. In this kind of situation, the breach could be considered so fundamental that you’re entitled to ask the court to undo the contract.

To make a strong case for rescission based on breach, you’ll need to show:

• Clear contractual terms: you must be able to point to what was actually agreed, so it’s obvious what the other party failed to do.
• Evidence of the breach: this could be photos of unfinished work, emails showing they’ve abandoned the project, missed deadlines, or proof that essential goods or services were never delivered.
• Severity of the breach: not every failure will be enough. The breach must be “repudiatory”, meaning it goes to the core of the contract and leaves the agreement pointless or unworkable. A minor delay or small defect isn’t enough to justify rescission.

If the court agrees that the breach was fundamental, and that it robbed you of the entire benefit you were meant to get from the contract, then rescission may be available to you as a remedy.

Lack of Capacity

For a contract to be legally valid, both you and the other party must have the mental and legal ability, or capacity, to understand and agree to its terms. If one of you didn’t have that capacity at the time, the contract may be voidable, meaning it can potentially be rescinded.

Capacity issues most commonly arise in the following situations:

• Minors: if you’re under 18, you may not be legally bound by most contracts, although agreements for essential needs (like food, housing, or education) can still be enforceable.
• Mental impairment: if someone has a serious mental health condition, dementia, or a learning disability that stops them from understanding what they’re agreeing to, they may not have the capacity to enter into a binding contract.
• Extreme intoxication: if you were so drunk or under the influence of drugs that you couldn’t understand what you were doing, and the other party knew (or should reasonably have known), then the contract may be set aside.

To show that capacity was lacking, you’ll need supporting evidence. For example:

• Proof of age, such as ID or a birth certificate (if you’re a minor)
• Medical records, a doctor’s letter, or expert reports (for mental capacity issues)
• Witness statements, especially if it was obvious at the time that you were impaired, such as signs of extreme intoxication
• Unusually one-sided contract terms that suggest you didn’t fully grasp what you were agreeing to

The key question is whether you (or the other party) truly understood the nature and consequences of the agreement at the time it was signed. If not, and if the other party knew, or reasonably should have known, then the contract could be rescinded.

Illegality

If a contract involves breaking the law, either in what it sets out to do or how it’s carried out, then it may be illegal, and you may be able to rescind it. In many cases, illegal contracts are considered void from the start, meaning they’re not legally enforceable at all.

You might come across this if you sign a contract for a legitimate purpose, but the other party carries it out in an unlawful way. For example, if you hire a builder and they deliberately use banned or unsafe materials to cut corners (without your knowledge), the contract could be considered illegal and potentially set aside.

To work out whether a contract is illegal, ask yourself:

• Does the contract describe something unlawful? If the agreement itself sets out an illegal purpose, it’s likely to be void.
• Is there evidence of illegal intent? This could include messages, emails, or behaviour showing that one or both parties planned to break the law as part of the deal.
• Is there a law or regulation that prohibits the contract? Some contracts are banned by statute, in which case they’re automatically unenforceable.

If the court finds that the agreement was illegal in its formation or intended performance, it will usually refuse to enforce it. In that case, you may be able to rescind the contract and avoid being bound by its terms.

What Happens Next? The Effect of Rescission

If your contract is successfully rescinded, the legal effect can be significant because the goal is to treat the contract as if it never existed. That means both you and the other party will need to return whatever you received under the agreement.

1. Returning to Your Original Position

The main consequence of rescission is restoring both sides to the positions they were in before the contract. For example:

• If you paid money, that money should be paid back to you
• If you received goods (like a car, equipment, or an item), you’d need to return them
• If a property changed hands, ownership would go back to the original owner

Let’s say you bought a car for £10,000, based on a false statement about its condition. If the court agrees to rescind the contract, you’d return the car, and the seller would return your £10,000, as if the sale never happened. If you’ve used the car in the meantime, the court might adjust the refund slightly to reflect that use, but the key aim is to unwind the deal completely.

2. Cancellation of Future Obligations

Once your contract has been rescinded, any ongoing duties or responsibilities you had under that agreement come to an immediate end.

So, if you were supposed to make regular payments, deliver a service, or continue receiving goods, those obligations are cancelled. You’re no longer bound by the contract’s future terms, it’s as if the deal never existed, and both sides are released from continuing commitments.

3. Legal Consequences

Although rescission aims to put you and the other party back in your original positions, there can still be important legal consequences to consider:

• You may need to go to court: If the other party disagrees with your right to rescind, you might have to start legal proceedings to enforce it. Rescission isn’t always automatic, especially if the facts are disputed.
• You need to act quickly: If you delay taking action after discovering the issue, a court might say you’ve waited too long. This is called “laches” and it can stop you from getting the remedy you’re otherwise entitled to. Even waiting a few months could harm your case if it looks like you accepted the contract despite the problem.
• You might be entitled to damages: In some cases, especially where there’s been misrepresentation, you may be able to claim financial compensation instead of (or in addition to) rescission.

4. No Right to Rescind After Full Performance

In most cases, once both sides have fully carried out their parts of the contract, the option to rescind it disappears.

If all the payments have been made, all services completed, and everything has been accepted, it becomes very difficult (and often impossible) to undo the agreement. At that point, the contract is seen as having run its course, and the law generally won’t allow you to rewind it.

For example, if you bought a car two years ago and only now discover a minor misrepresentation (like an overstated feature that doesn’t affect how the car runs) the court is unlikely to let you return the car and recover the full price. Instead, your only option might be to claim limited damages for the misrepresentation, rather than rescinding the contract entirely.

Practical Advice

Feeling trapped in a contract can be stressful, but taking the right steps early on can make a huge difference. Here’s what you can do if you think rescission might be an option:

1. Gather Your Evidence

Start by collecting everything you have that relates to the contract and try to organise it clearly as this will make it much easier to explain your position if you seek legal advice or end up in a dispute. Useful evidence can include:

• A copy of the signed contract
• Any emails, text messages, letters, or notes from phone calls
• Advertisements or brochures that made specific claims about the goods or service
• Receipts or bank statements showing what you paid
• Photos or videos, especially if the issue relates to damaged or defective goods, property, or work done
• Names and contact details of any witnesses
• Expert reports, such as a mechanic’s opinion on a faulty car or a surveyor’s assessment of a property problem

Getting everything in one place now will help you take quicker and more confident action later.

2. Act Quickly

Time really matters when it comes to rescission. If you wait too long after discovering the problem, you could lose the right to undo the contract altogether.

As soon as you realise something is wrong, whether it’s a misrepresentation, mistake, or serious breach, take prompt action. That doesn’t mean rushing to court, but it does mean being proactive. Speak to a solicitor, gather your evidence, and formally notify the other party that you may be seeking to rescind.

Delays can be seen as acceptance of the contract, so the sooner you act, the stronger your position will be.

3. Consider Alternatives

While rescission can be a powerful remedy, it’s not always the only (or even the best) option in every situation. Depending on the circumstances, you might find another route is more practical or less confrontational.

Here are a few alternatives worth exploring:

• Negotiation: You may be able to reach a fair compromise with the other party without escalating things further. A well-drafted settlement can avoid the time and cost of legal action.
• Mediation: This involves a neutral third party helping both sides come to an agreement. It’s often quicker and less stressful than going to court.
• Claiming Damages: If rescinding the contract isn’t possible or desirable (for example, because the goods have already been used or services completed), you might still be able to claim financial compensation for the loss you’ve suffered due to misrepresentation or breach.

4. Seek Legal Advice

This is arguably the most important step you can take. Contract law can be complex, and successfully arguing for rescission often requires not just a good understanding of the law, but also a strategic approach to applying it to your specific situation.

At The Jonathan Lea Network, our experienced solicitors can help you:

• Assess the strength of your case and tell you whether you genuinely have grounds for rescission
• Explain any risks and potential costs, so you know exactly what to expect
• Advise on the best next steps e.g. whether rescission is the most appropriate remedy, or whether another route (like claiming damages) might better protect your interests
• Prepare and send formal letters to the other party
• Act for you in negotiations or legal proceedings, if things escalate

You don’t have to navigate this alone,  we’re here to give you the clarity and confidence to make informed decisions about your next move.

How we can help

Rescission can be a powerful way to unwind a contract entered into under unfair or flawed circumstances, but timing and the right advice are crucial. If you’re unsure about your rights or next steps, we’re here to help you find the best way forward.

At The Jonathan Lea Network, we offer a no-cost, no-obligation 20-minute introductory call as a starting point or, in some cases, if you would just like some initial advice and guidance, we will instead offer a one-hour fixed fee appointment (charged from £250 plus VAT to £350 plus VAT* depending on the complexity of the issues and seniority of the fee earner).

Please email wewillhelp@jonathanlea.net providing us with any relevant information ensuring that any call we have is as productive as possible or call us on 01444 708640. After this call, we can then email you a scope of work, fee estimate (or fixed fee quote if possible), and confirmation of any other points or information mentioned on the call.

 

How To Rescind a Contract FAQs

 

 

*VAT is charged at 20%

This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited. 

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