When is the Remedy of Rescission Available in Nevada?

Rescission returns both parties to their pre-contractual situation.[1]  Rescission is a remedy which allows the “harmed” party, either through unilateral action, or through the institution of a suit in equity, to abrogate or cancel the contract totally, and returns the parties to the position they held prior to the execution of the contract.[2]  “A priori, where there has been a valid rescission of the contract, there is no longer any contract and, therefore, no longer a cause of action for breach.”[3]  (emphasis added.)

Since rescission voids a contract ab initio, a claim for damages, which must insist upon the existence of the contract, must be barred.[4]  Restitution is a form of rescission.[5]  Rescission has two aspects: (1) cancellation of a contract of sale; and (2) restitution of the purchase price.[6]  Restitution is an appropriate remedy where a contract has been rescinded.[7]  The Nevada Supreme Court has unequivocally declared that restitution (rescission) and damages are inconsistent remedies, and that election of one is a bar to the other.[8]

[1] Bergstrom v. Est. of DeVoe, 854 P.2d 860, 861-62 (1993) (Court held that one cannot gain both the benefits of a rescission of a contract and award for damages for breach of that contract).

[2] Great am. Ins. Co. v. Gen. Builders, Inc., 113 Nev. 346, 934 P.2d 257, 262, n.6 (1997).

[3] Id.

[4] Bergstrom v. DeVoe, 109 Nev. 575, 577, 854 P.2d 860, 862 (1993).

[5] Reed v. Sixth Jud. Dist. Ct., 75 Nev. 338, 34, 341 P.2d 100, 101 (1959)

[6] Dan B. Dobbs, Law of Remedies, 552 (2d. Ed. 1993)

[7] Id.

[8] Mullinix, 81 Nev. At 454; See also Norris, 225 P.2d at 268; SJS Inv., 597 N.E.2d at 1215; Timmons, 601 S.W.2d at 689; Loflin v. Blume, 1198 WL 132679 (Tenn. Ct. App. 1998); In re Zimmermann v. Thompson, 114 N.W.2d 116, 117 (Wis. 1962); Mansfield v. Smith, 277 N.W.2d 740, 748 (Wis. 1979).



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