What is rescission or reformation of contract?
In Florida, rescission and reformation are legal remedies for parties seeking to modify or cancel a contract. Rescission is canceling a contract and returning the parties to their positions before the contract’s formation. Reformation is the process of changing the terms of an agreement to reflect the parties’ original intent.
For example, suppose a buyer purchases a home based on false information. The buyer may then seek to rescind the contract and recover any money or property transferred under the contract.
On the other hand, the reformation of a contract usually involves a drafting mistake resulting in an unintended provision in the contract. The parties cannot use reformation to make a new contract but may seek to reform the contract to correct the mistake so the contract reflects the parties’ true intentions. For example, suppose a sale of goods mistakenly lists the price as $100 instead of $1,000. The parties may then seek to reform the contract to reflect the parties’ intended price of $1,000.
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What legal issues typically arise related to the rescission or reformation of a contract?
The following disputes are among the most common in the rescission or reformation of a contract:
- Grounds for rescission: To seek rescission of a contract, the party must have valid legal bases. Common grounds for rescission in Florida may include fraud, misrepresentation, mistake, duress, undue influence, or other factors that render the contract voidable.
- Unjust enrichment: Rescission can be allowed when there is a unilateral, one-sided mistake to prevent the unjust enrichment of a party. Unjust enrichment can occur when one party receives or gives a benefit to another party without any restitution in return. Parties may dispute whether unjust enrichment is present for purposes of rescission.
- Time limits: A wronged party must seek rescission within a reasonable time after discovering the grounds for rescission. In Florida, the statute of limitations for rescission varies depending on the type of contract and the circ*mstances surrounding the contract.
- Parol evidence: Rescission or reformation may be based on parol evidence, such as oral statements made by one party before the writing of a contract.
- Unconscionability: A contract may be subject to rescission or reformation if it is unconscionable, meaning it is so one-sided or unfair that it shocks the conscience. In Florida, the courts will consider various factors, such as the relative bargaining power of the parties, the terms of the contract, and the circ*mstances surrounding the formation of the contract, in determining whether a contract is unconscionable.
- Mutual mistake: The contract reformation may be based on a mutual mistake, where both parties intended to include a provision in the contract, but the written contract does not accurately reflect their intentions. Rescission may also occur because of a mutual mistake concerning a material fact, such as an unforeseen trade war or a pandemic causing price increases.
What are relevant laws related to the rescission or reformation of a contract in Florida?
In Florida, the relevant laws related to rescission or reformation of contract include:
- Florida Statutes Section 95.11(3)(l): This statute sets out the statute of limitations for various types of legal actions, including actions to rescind a contract. Under this statute, a plaintiff must bring an action to rescind a contract within four years from the date the cause of action accrues.
- Florida Statutes Section 95.11(2)(b): A plaintiff must pursue other legal or equitable actions on a contract within five years.
Florida common law, made by Judges as they decide past cases, also provides relevant principles and rules related to the rescission and reformation of contracts. Therefore, Florida courts may rely on these principles from past decisions when determining if and when a contract should be reformed or rescinded.
What is required to prove a case of rescission or reformation of a contract in Florida?
In Florida, the requirements for proving a case of rescission or reformation of a contract may vary depending on the case’s specific circ*mstances. However, some general elements must be present to successfully seek rescission or reformation of a contract in Florida. These include:
Rescission:
- Parties relationship or character: Plaintiff can meet this element by alleging a relationship with the other party to the contract;
- Making of contract: Plaintiff must allege the existence of a contract;
- Valid grounds for rescission: Grounds for rescission can include fraud, misrepresentation, mistake, duress, undue influence, or other factors rendering the contract voidable;
- Notice of rescission to the other party; Plaintiff notify the other party that they are rescinding the contract;
- Restoration of benefits to the other party: Plaintiff may satisfy this element by returning any benefits to the other party or stating that the plaintiff did not receive any benefits from the contract;
- No adequate remedy at law.
Reformation:
- Mistake: To seek reformation of a contract, the party must show that there is a drafting error or some mistake that renders the agreement defective;
- Parties Intent: To seek reformation of a contract based on mutual mistake, both parties must establish their intent to include a provision in the contract, but the written contract does not accurately reflect their intentions;
- Timeliness: The party seeking reformation must seek reformation within a reasonable time after discovering the mistake.
When a set of facts is appropriate to meet the requirements of rescission or reformation of a contract, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies, such as:
- Restitution
- Specific performance
- Rescission damages: Sometimes, the party seeking rescission may be entitled to damages as a result of the other party’s wrongful conduct, which necessitated rescission
- Equitable relief: This may include an injunction to prevent a party from continuing to benefit from a rescinded contract.
To see what actions may be available for your unique situation, please contact our office to set up your initial consultation.
What are common defenses to the rescission or reformation of contracts in Florida?
The primary defenses to rescission or reformation of contract in Florida include:
- Statute of limitations: There is a statute of limitations for bringing an action to rescission or reform a contract in Florida.
- Laches: If a party seeking rescission or reformation of a contract has unreasonably delayed bringing the claim, a court may find that laches bars the claim.
- Waiver: If a party has knowingly and voluntarily waived their right to rescission or reformation of a contract, they may not be able to bring a claim for those remedies later.
- Unclean hands: If a party seeking rescission or reformation of a contract has engaged in wrongful conduct themselves, such as fraud or misrepresentation, a court may refuse to grant the requested remedy.
- Lack of proof: If a party seeking rescission or reformation of a contract cannot provide clear and convincing evidence of the grounds for their claim, the court may not grant the requested remedy.
- Adequacy of remedy at law: In some cases, a party seeking rescission or reformation of a contract may have an adequate remedy, such as a claim for damages, and a court may decline to grant the requested remedy.
It is important to note that the defenses available in a particular case may depend on the specific facts and legal theories involved.
To see what defenses may be available for your unique situation, please contact our office to set up your initial consultation.
Have more questions about a rescission or reformation of a contract-related situation?
Crucially, this overview of rescission or reformation of contract does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circ*mstances.
Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.
Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.
If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.
