A rescission of a contract by consent or a release by the other contracting party shall be a complete defense.
(Orig. Code 1863, § 2800; Code 1868, § 2808; Code 1873, § 2859; Code 1882, § 2859; Civil Code 1895, § 3710; Civil Code 1910, § 4304; Code 1933, § 20-905.)
Cross references.- General rules of pleading and requirement of setting forth release as an affirmative defense, § 9-11-8.
JUDICIAL DECISIONS
Generally speaking, rescission is in toto. It abrogates contract not partially but completely. Lytle v. Scottish Am. Mtg. Co., 122 Ga. 458, 50 S.E. 402 (1905).
Contract may be rescinded by mutual consent of parties. Stephens v. Wilson, 58 Ga. App. 24, 197 S.E. 350 (1938).
Parties may by mutual consent abandon contract so as to make contract not thereafter binding. Manry v. Selph, 77 Ga. App. 808, 50 S.E.2d 27 (1948); M.W. Buttrill, Inc. v. Air Conditioning Contractors, 158 Ga. App. 122, 279 S.E.2d 296 (1981).
Mutual consent necessary for rescission.
- If a contract is made, one party to the contract can not rescind the contract by merely giving notice to the other of one's intention to do so, without the agreement or assent of such other; but the contract may be rescinded with the assent of both parties. Central of Ga. Ry. v. Gortatowsky, 123 Ga. 366, 51 S.E. 469 (1905).
Agreement to rescind must be executed before this statute will apply. Hoffman v. Franklin Motor Car Co., 32 Ga. App. 229, 122 S.E. 896 (1924) (see O.C.G.A. § 13-5-7).
Cancellation of guaranty not required to be in writing.
- In a creditor's suit on a guaranty, although the guaranty agreement was required to be in writing, a writing was not necessary if the parties mutually agreed to cancel the executory guaranty; however, there was an issue of fact as to whether there was a meeting of the minds between the guarantor and the creditor's manager. Crop Production Services, Inc. v. Moye, 345 Ga. App. 228, 812 S.E.2d 565 (2018).
Rescission contemplates and requires restoration of status quo. Sommer v. International Harvester Co. of Am., 56 Ga. App. 655, 193 S.E. 476 (1937).
When contract is rescinded, parties are not to be left where rescission finds the parties; original status must be restored, or equivalent therefor must be provided in contract or furnished by law. Lytle v. Scottish Am. Mtg. Co., 122 Ga. 458, 50 S.E. 402 (1905); Eller v. McMillan, 174 Ga. 729, 163 S.E. 910 (1932).
Evidence of rescission may be by conduct and not by words. M.W. Buttrill, Inc. v. Air Conditioning Contractors, 158 Ga. App. 122, 279 S.E.2d 296 (1981).
Doctrine of restitution inapplicable to rescissions by mutual consent.
- Doctrine of restitution, as applicable to rescission of contracts, applied only when one party sought to rescind contract without consent of other under former Civil Code 1910, § 4306 (see O.C.G.A. § 13-4-62). It had no application to rescission of contract by mutual agreement of parties under former Civil Code 1910, § 4304 (see O.C.G.A. § 13-5-7). Manley v. Underwood, 27 Ga. App. 822, 110 S.E. 49 (1921).
Terms of agreement of rescission may require restitution. Steen & Marshall v. Harris, 81 Ga. 681, 8 S.E. 206 (1888).
While actual fraud necessary for rescission at law, equity may allow rescission for constructive fraud.
- While only actual fraud will authorize ex parte rescission of sale of personalty so as to enable aggrieved party to sue at law, as in trover, for property that one may have delivered to other under contract, a sale either of realty or of personalty may be rescinded by court of equity for mere constructive fraud, where other essentials of case are established. Puckett v. Reese, 203 Ga. 716, 48 S.E.2d 297 (1948).
Release must be supported by consideration. Riggens v. Pomona Prods. Co., 82 Ga. App. 636, 61 S.E.2d 682 (1950).
Agreement to release one of two joint makers of note requires consideration. Fowler v. Coker, 107 Ga. 817, 33 S.E. 661 (1899).
In rescission, abandonment or cancellation, mutual promises and agreement provide sufficient consideration. Riggens v. Pomona Prods. Co., 82 Ga. App. 636, 61 S.E.2d 682 (1950).
Mutual consent to rescind contract is sufficient consideration. Hardy v. Maddox, 72 Ga. App. 707, 34 S.E.2d 903 (1945).
In agreement to rescind executory agreement, consideration on part of each is the other's renunciation.
- While a valid executed contract cannot be discharged by simple agreement, but only by performance, by release under seal, or by accord and satisfaction, one that is executory (that is, one that has not been acted upon) may be discharged by agreement of parties that the agreement shall no longer bind either of them; consideration on part of each being other's renunciation. Manry v. Selph, 77 Ga. App. 808, 50 S.E.2d 27 (1948); Loadman v. Davis, 210 Ga. 520, 81 S.E.2d 465 (1954).
Surrender by each party of rights under contract is sufficient consideration for rescission.
- Contract may be rescinded by mutual consent, in which case surrender by each party of the party's rights under the contract is sufficient consideration; but it is also possible that party to valid contract might require some additional consideration before surrendering valuable rights under the contract. Warren v. Gray, 90 Ga. App. 398, 83 S.E.2d 86 (1954).
Executory written contract may be rescinded by subsequent oral agreement based upon mutual promises. Manry v. Selph, 77 Ga. App. 808, 50 S.E.2d 27 (1948).
Rescission of executory conditional sale where purchase money notes already transferred to third person.
- When no part of purchase money has been paid, sale may be rescinded by mutual consent, though purchase money notes have been transferred to third person, provided seller takes up notes in consequence of rescission, and either returns them to maker or holds the notes subject to the maker's order. Steen & Marshall v. Harris, 81 Ga. 681, 8 S.E. 206 (1888).
When rescission of sale complete.
- Rescission of sale is complete as soon as relation of debtor and creditor for whole purchase money is dissolved, and this is accomplished when purchaser holds property for seller, and seller holds notes for purchaser. Steen & Marshall v. Harris, 81 Ga. 681, 8 S.E. 206 (1888).
Summary judgment improper where material issue of fact remained as to oral rescission.
- It was error to grant summary judgment to a corporation in the corporation's suit to recover for services performed for a limited liability company where an affidavit created a material issue of fact as to whether, before the time period for which payment was sought, the parties had mutually entered into an oral agreement rescinding their prior written agreement. WorksiteRx, LLC v. DrTango, Inc., 286 Ga. App. 284, 648 S.E.2d 775 (2007).
Executory agreement to rescind not accord and satisfaction absent express agreement to that effect. Redman v. Woods, 42 Ga. App. 713, 157 S.E. 252 (1931), overruled in part by Worthen v. State, 2019 Ga. LEXIS 22 (Ga. 2019); Cohutta Talc Co. v. Gulf Ref. Co., 47 Ga. App. 439, 170 S.E. 545 (1933).
Rescission and recovery of damages for contract breach are inconsistent remedies.
- There cannot be rescission by buyer coupled with recovery for damages by reason of alleged breach of contract; the two remedies are inconsistent. Sommer v. International Harvester Co. of Am., 56 Ga. App. 655, 193 S.E. 476 (1937).
Rescission abrogates contract, not partially but completely. Eller v. McMillan, 174 Ga. 729, 163 S.E. 910 (1932).
Valid rescission renders agreement inoperative and no action can be maintained upon the agreement.
- If there is mutual consent to rescind exclusive listing contract, unaffected by fraud, entire agreement becomes inoperative and there can be no action upon the agreement. Hardy v. Maddox, 72 Ga. App. 707, 34 S.E.2d 903 (1945).
Upon rescission, damages, if any, determined not by rescinded contract, but by equity. Lytle v. Scottish Am. Mtg. Co., 122 Ga. 458, 50 S.E. 402 (1905); Eller v. McMillan, 174 Ga. 729, 163 S.E. 910 (1932).
General release does not necessarily absolve strangers to the release agreement. Brown v. Moseley, 175 Ga. App. 282, 333 S.E.2d 162 (1985).
Cited in Bell v. Hutchings, 86 Ga. 562, 12 S.E. 974 (1891); Haigler v. Adams, 5 Ga. App. 637, 63 S.E. 715 (1909); Daniel v. Burson, 16 Ga. App. 39, 84 S.E. 490 (1915); Haygood v. Kennedy, 27 Ga. App. 689, 109 S.E. 522 (1921); Clark v. Powell, 30 Ga. App. 198, 117 S.E. 250 (1923); Hoffman v. Franklin Motor Car Co., 32 Ga. App. 229, 122 S.E. 896 (1924); Robinson v. Odom, 35 Ga. App. 262, 133 S.E. 53 (1926); Rural Elec. Appliance Co. v. Joiner, 69 Ga. App. 353, 25 S.E.2d 428 (1943); Cohen v. Cohen, 200 Ga. 33, 35 S.E.2d 908 (1945); Leakey v. Duke, 77 Ga. App. 431, 48 S.E.2d 709 (1948); Vlass v. Walker, 86 Ga. App. 742, 72 S.E.2d 464 (1952); Owens v. Service Fire Ins. Co., 90 Ga. App. 553, 83 S.E.2d 249 (1954); Farr v. McCook, 95 Ga. App. 749, 98 S.E.2d 584 (1957); Swanson v. Chase, 107 Ga. App. 295, 129 S.E.2d 873 (1963); Knight v. Millard, 119 Ga. App. 696, 168 S.E.2d 331 (1969); Olivetti Leasing Corp. v. Metro-Plastics, Inc., 128 Ga. App. 401, 196 S.E.2d 686 (1973); Johnson Ventures, Inc. v. Barkin, 141 Ga. App. 810, 234 S.E.2d 340 (1977); Griffin v. Adams, 175 Ga. App. 715, 334 S.E.2d 42 (1985); Miller v. Economy Trading & Liquidating, Inc., 193 Ga. App. 344, 387 S.E.2d 620 (1989); Beasley v. Agricredit Acceptance Corp., 224 Ga. App. 372, 480 S.E.2d 257 (1997).
RESEARCH REFERENCES
Am. Jur. 2d.
- 66 Am. Jur. 2d, Release, §§ 1, 4, 6, 8, 16.
C.J.S.- 17 C.J.S., Contracts, § 129. 17A C.J.S., Contracts, §§ 385, 389, 392, 413 et seq., 525.
ALR.
- Mutual rescission of contract as affecting right to damages for previous breach, 24 A.L.R. 253.
Stamp or transfer tax as payable in respect of tender or return of securities or documents incident to rescission of contract, 100 A.L.R. 1420.
Pecuniary damage as essential to rescission of contract for purchase of real or personal property, 106 A.L.R. 125.
Repossession of chattels by seller upon their return or abandonment by buyer as effecting a mutual rescission or as evidence thereof, 106 A.L.R. 703.
Assignability of right to rescind or of right to return of money or other property as incident of rescission, 110 A.L.R. 849; 162 A.L.R. 743.
Breach of obligation to pay tax or assessment on land sold as ground for rescission of contract, 139 A.L.R. 971.
Reconveyance to grantor of land previously conveyed by him in consideration of support of grantor and other persons by grantee, as affecting such other persons, 150 A.L.R. 412.
Failure to revive judgment against a number jointly, as to some of them, as making applicable the rule that a release of one is a release of all, 160 A.L.R. 678.
Compensation as alternative relief upon denial of rescission to purchaser of land, 175 A.L.R. 686.
Collision insurance: insured's release of tortfeasor before settlement by insurer as releasing insurer from liability, 38 A.L.R.2d 1095.
What constitutes reservation of right to terminate, rescind, or modify contract, as against third party beneficiary, 44 A.L.R.2d 1270.
Timeliness of tender or offer of return of consideration for release or compromise, required as a condition of setting it aside, 53 A.L.R.2d 757.
Right of action for fraud, duress, or the like, causing instant plaintiff to release or compromise a cause of action against third person, 58 A.L.R.2d 500.
Applicability of statute of frauds to agreement to rescind contract for sale of land, 42 A.L.R.3d 242.
Vendor and purchaser: mutual mistake as to physical condition of realty as ground for rescission, 50 A.L.R.3d 1188.
Refusal to pay debt as economic duress or business compulsion avoiding compromise or release, 9 A.L.R.4th 942.