Rescission, Restitution and the Principle of Fair Redress: A Response to Professors Brooks and Stremitzer

Abstract

Brooks and Stremitzer write that a limited rescission model is “excessive” and based on a “misunderstanding” of the economic effects of these remedies.Their key premise is that legal authorities have exaggerated the threat to contract stability and other normative values posed by liberal access to rescission. Therefore, the authors posit that rational parties from an ex ante perspective would often bargain for broad rights of rescission even if damages for breach “were fully compensatory and costless to enforce."

In contrast, I will perform an intensive case law and statutory analysis showing that the law appropriately follows a principle of “fair redress,” which follows a liberal rescission/fair restitution approach. Indeed, the authors’ opposition to reliance and disgorgement is particularly counterproductive because their stance undermines the core policy of rescission and restitution, which is to afford the injured party an equitable remedy.

Keywords: rescission, restitution, rational choice theory, relational contracts