What Is a Rescission Agreement?

Standardized Legal Documents What Is a Rescission Agreement?

How To Create a Rescission Agreement 

While legal documents and contracts are a significant part of many activities, do you need to hire a lawyer each time you need to prepare a new contract? 

When should you opt for a rescission agreement? DoNotPay provides answers to these and many other questions in this article and on our website.  

What Is Rescission in Contract Law?

Rescission means the cancellation of a contract and can be:

Types of Rescission


UnilateralWhen one party cancels a contract because of another party's material breach
MutualWhen both contracting parties agree to discharge the obligations of a contract. In this case, parties sign a rescission agreement—also called a mutual rescission and release agreement
Court-mandatedCourts can void a contract by using rescission

You can say that a contract is rescinded when:

  1. The whole contract is canceled, i.e., not only a part of the contract or certain obligations
  2. All contractual parties need to return everything they have obtained or exchanged under the contract

What Types of Contracts Can Be Rescinded?

Any contract can be rescinded, but a rescission of a contract often applies to the following:

  • Insurance
  • Sale of land 
  • Timeshare sales
  • Sale of business
  • Business-to-consumer contracts

If you would like to find a way to get out of a contract, you should not rely on words of mouth but prepare a rescission agreement instead.

Circumstances for a Rescission Agreement

A contract can be rescinded if there is evidence of a material error, including:

  1. Fraud
  2. Illegal acts
  3. Mutual errors
  4. Breach of contract
  5. Lack of mental or legal capacity
  6. One party not fulfilling its obligation 
  7. Duress, coercion, or undue influence

While different states may have different laws addressing rescission, some contracts—e.g., between a lender and consumer—might be federally regulated.

How To Create a Rescission Agreement

As a rescission agreement is not a complex type of legal document, you could create one by yourself using contract templates available online. Keep in mind that not all templates are free to access, fill out, and download.  

If you are not sure how to create a contract, a lawyer can assist you with this matter. While this might be the best option, it can also be the most expensive one.

What To Include in a Rescission Agreement

A rescission agreement needs to include the following:

  1. Rescission, i.e., that the contractual parties have agreed to back out of the original contract
  2. Release, i.e., that these parties jointly agree to cancel any obligations between them

The information that should be included in a rescission agreement is:

  • Names and addresses of both parties
  • Specific data about the original contract, including the:
    • Names of contractual parties
    • Subject matter
    • Date when the original contract was signed
  • Date and signatures of both parties
  • Names and signatures of witnesses

The Termination vs. Rescission of a Contract

The termination and rescission of a contract are not the same. This table clarifies the difference:

  • Contractual obligations are still in place
  • All contractual parties can sue each other for the remaining obligations after the termination of the contract
  • A contract is:
    • Rendered void or null
    • No longer legally binding
  • Contractual obligations vanish

Do I Have the Right To Rescind a Contract Without a Rescission Agreement?

You can use the Federal Trade Commission’s (FTC) Cooling-Off Rule to rescind a contract in some instances. This rule applies to high-pressure sales circumstances, including sales made at:

  • Hotels
  • Restaurants
  • Dealerships
  • Conventions
  • Your home or business place

The FTC’s Cooling-Off Rule gives you three days or 72 hours to back out of a contract. While a rescission agreement is not necessary, you need to sign, date, and send:

  1. A cancellation form if the seller has provided you with one
  2. A cancellation letter if the seller has not given you a cancellation form

DoNotPay Can Help You Create Numerous Documents

How about saving your time and money? Sign up for DoNotPay to create multiple documents and agreements tailored to your specific needs, including the following:

DoNotPay Is Your Safety Net for Document Preparation

Subscribe to DoNotPay to get your customized contract and follow these steps:

  1. Choose the Standardized Legal Documents feature
  2. Enter the name of the document you need
  3. Provide some basic details to our chatbot (e.g., names, addresses, and other necessary information)

In a matter of minutes, you will receive a document addressing your specific needs. 

The best part is that once you have received your legal document, you can use our app to:

  1. E-sign the document
  2. Get it notarized 24/7 using our Notarize Any Document product
  3. Fax it securely via the Online Fax feature

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