law-rescission-remedy | equitable remedies | contract defenses |
RESCISSION
Rescission is an equitable remedy that operates to extinguish a contract that is legally valid but must be set
aside due to fraud, mistake, or for some other reason to avoid unjust enrichment. Martin v. Cadle Co., 133
S.W.3d 897, 903 (Tex. App.-Dallas 2004, pet. denied); Country Cupboard, Inc. v. Texstar Corp., 570 S.W.2d
70, 73-74 (Tex. Civ. App.-Dallas 1978, writ ref'd n.r.e.).
To be entitled to rescission, a party must show: (1) he and the defrauding party are in the status quo (ie. he is
not retaining benefits received under the instrument without restoration to the other party) or (2) there are
equitable considerations that obviate the need for the status quo relationship. Shenandoah Assoc. v. J & K
Prop., Inc., 741 S.W.2d 470, 475 (Tex. App.-Dallas 1987, writ denied) (citing Boyter v. MCR Constr. Co., 673
S.W.2d 938, 941 (Tex. App.-Dallas 1984, writ ref'd n.r.e.)). However, an inability to return the parties to their
former position should be considered in determining whether rescission would be inequitable. See Ennis v.
Interstate Distributors, Inc., 598 S.W.2d 903, 906 (Tex. App.-Dallas 1980, no writ).
Recission is a type of relief that must be specifically prayed for or the trial court cannot grant it. Burnett v.
James, 564 S.W.2d 407, 409 (Tex. Civ. App.-Dallas 1978, writ dism'd)
A unilateral mistake will not normally void a contract. See Johnson v. Conner, 260 S.W.3d 575, 581
(Tex.App.-Tyler 2008, no pet.); Ledig v. Duke Energy Corp., 193 S.W.3d 167, 175 (Tex. App.-Houston [1st
Dist.] 2006, no pet.). Equity may permit rescission based on a unilateral mistake only when
(1) the mistake is of so great a consequence that to enforce the contract would be unconscionable; (2) the
mistake relates to a material feature of the contract; (3) the mistake occurred despite ordinary care; and (4)
the parties can be placed in status quo, i.e., the rescission must not prejudice the other party except for the
loss of the bargain. Cigna Ins. Co. v. Rubalcada, 960 S.W.2d 408, 412 (Tex.App.-Houston [1st Dist.] 1998, no
pet.).
RESCISSION CASE LAW FROM THE HOUSTON COURTS OF APPEALS
Mallia v. Mallia (Tex.App.- Houston [14th Dist.] Apr. 7, 2009)(Yates)(judgment on mediated settlement
agreement MSA, revocation of consent, rescission, rescinding agreement prior to judgment)
AFFIRMED: Opinion by Justice Brock Yates
14-07-00695-CV Sharon Fountain Mallia and Charles Christopher Mallia v. Sharon Biering Mallia
Before Justices Brock Yates, Seymore and Boyce
Trial Court Judge: Russell P. Austin
Gulliver v. Shafer No.14-07-00217-CV Tex.App.- Houston [14th Dist.] Jan. 15, 2008)(Anderson)(real estate
sale, specific performance, rescission)
REVERSED AND REMANDED: Opinion by Justice Anderson
Before Chief Justice Hedges, Justice Anderson, Senior Justice Murphy
Joel Gulliver ET UX, Mary Ann Gulliver v. Lee Shafer ET UX, Pamela Shafer
Appeal from County Court at Law No 1 of Fort Bend County (Hon. Ben "Bud" W. Childers)
Soto v. International Medical Group, Inc. (Tex.App.- Houston [14th Dist.] Apr. 3, 2007)(Anderson)(medical
insurance contract was properly rescinded) (insurance law, coverage dispute, rescission, accord and
satisfaction)
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