Professionals who rely on contracts for business purposes often assume that major breaches invalidate their agreements. They may believe that they can automatically terminate the working arrangement with the other party after a violation of the agreement.
While that is common sense, it is not necessarily what occurs under the law. Many contracts include provisions, such as severability clauses, that protect the overall validity of the contract even after a breach occurs. In other words, one party’s failure to render services or pay on time does not eliminate the contractual obligations imposed on the other party.
In scenarios where breaches have damaged the working relationship between two parties, the party not in breach of the contract may need to ask a judge to terminate their contractual obligations to prevent allegations of a breach.
Contract rescission ends obligations
While a breach of contract does not necessarily terminate the agreement between parties, a judge has the authority to end contractual obligations. If they agree that the contract is valid and that there is reason to take legal action, they can order contract rescission.
Rescission invalidates the contract and officially terminates the obligations that each party has to the other. In some cases, rescission may carry with it an obligation to refund deposits or other payments rendered.
Judges may issue awards of damages to offset the monetary impact of contractual violations. They can also issue injunctions to protect the plaintiff from future misconduct.
Pursuing contract rescission during civil litigation is one way to resolve significant breach of contract issues. Professionals impacted by contract disputes may need help weighing their options and pursuing the best solution possible.
