Can I Rescind a Business Contract?
Did your business recently enter a contract? Are you having second thoughts about the terms of the agreement? You may be wondering: Can I rescind a business contract? The answer is “it depends.” While Florida law provides a limited short-term rescission right for certain types of agreements, the contract itself will largely determine if and when it can be rescinded. Here, our West Palm Beach commercial litigation attorney explains the key things to know about contract rescission in Florida.
What is Contract Rescission?
Contract rescission is the cancellation of a contract. What happens, it returns all parties involved to their pre-contractual positions—as if the agreement had never been made. It can occur in a number of different contexts—from a party invoking their right to cancel during a statutory cooling office period to a party voiding a contract because of misconduct by the other side.
Know the Law: Limited Right to Cancel Contract in Florida (Case Specific)
As described by The Florida Bar, “there is no automatic right to cancel a legally binding contract once there has been a valid offer and acceptance.” However, in specific circumstances, Florida law does mandate a “cooling-off” period for contracts during which parties have a right to rescind (cancel) the agreement. For example, contracts for timeshares in Florida are subject to a mandatory minimum 72-hour cooling-off period. By law, the contract can be canceled without penalty during that time. Still, there is no automatic rescission right for general commercial contracts in Florida.
The Contract Itself Provides (or Denies) Primary Right of Rescission
In Florida, business contracts may include a right of rescission as a term of the agreement. Indeed, parties to a contract have considerable discretion to determine their own terms—including an expanded “cooling-off” period and more comprehensive rescission rights. A contract could potentially be canceled in any of the following contexts:
- Early Termination Option: Some contracts may include an early termination option or ETO. In effect, this option grants the parties the right to rescind the agreement before its natural conclusion. A well-drafted early termination provision will clearly explain the conditions and consequences of termination.
- Breach of Contract: In cases where one party breaches the terms of the contract, the non-breaching party may be entitled to rescind the agreement. Breach of contract occurs when one party fails to fulfill its obligations as outlined in the contract. Rescission is a remedy for a breach.
- Material Defect: Business contracts may allow for rescission if a material defect is discovered. A material defect refers to a significant flaw or deficiency in the subject matter of the contract that substantially impacts its value or purpose. Upon discovering such a defect, the affected party may choose to rescind the contract as a remedy.
Contact Our Palm Beach County Business Dispute Attorney Today
At Pike & Lustig, LLP, our Florida business dispute lawyers are focused on helping clients solve problems—including complex contract disputes. If you have any specific questions about contract rescission, we can help. Contact us today for a confidential case review. From our West Palm Beach office, our firm handles contract law matters all across South Florida.
Source:
floridabar.org/public/consumer/tip012/
