Remedies On and Off Contract

Abstract

Easy availability of rescission followed by restitution has, for centuries, unsettled legal authorities, who fear it as a threat to commercial order or other normative values. Responding to these fears, authorities have limited the ease with which rescission may be elected. Their approach is often excessive and based on misunderstandings of the remedy’s effects. Rescission followed by restitution may in fact promote contracting by allowing parties to create efficient incentives. Concern about the stability of contracting is not entirely unfounded, but the problem is not primarily due to the ease with which promisees are able to rescind following breach, rather it is the remedy that follows rescission. This essay presents an argument for liberal rescission followed by limited ensuing remedies. Modern reforms and reform proposals seem to embrace the opposite route of restricting access to rescission while at times allowing for generous ensuing remedies. Ironically, these proposals, as demonstrated in the essay, pose the real threat to contractual stability.

Keywords: contracts, rescission, aedilitian remedies

JEL Classification: K12