Rescission of a settlement agreement: What you need to know

A settlement agreement is a legally binding contract that resolves a dispute between two parties. It provides a way for parties to avoid litigation and come to a compromise that benefits both sides. However, there are situations where one or both parties may want to rescind or cancel the settlement agreement. In this article, we`ll explain what rescission of a settlement agreement means, when it can be done, and what the legal implications are.

What is rescission of a settlement agreement?

Rescission of a settlement agreement means the cancellation or reversal of the agreement. This can happen for several reasons, such as fraud, mistake, duress, undue influence, or breach of contract. When a settlement agreement is rescinded, it is as if the agreement never existed, and both parties are restored to their original legal positions before the agreement was made.

When can a settlement agreement be rescinded?

A settlement agreement can be rescinded if one or both parties can prove that there was a material mistake in the agreement. A material mistake refers to a significant error or omission that affects the substance of the agreement and would have affected the parties` decision to enter into the agreement. For example, if one party mistakenly believes that they are waiving a right that is not covered by the agreement, or if they were unaware of a fact that would have affected their decision, they may seek rescission.

Similarly, a settlement agreement can be rescinded if one or both parties were under duress or undue influence when they entered into the agreement. Duress refers to threats or coercion that forces a person to enter into an agreement against their will, while undue influence refers to a situation where one party exerts undue pressure or control over the other party, making it difficult for them to freely negotiate.

Finally, a settlement agreement can be rescinded if there has been a breach of the agreement, such as one party failing to meet their obligations under the agreement. In this case, the party that has been harmed by the breach can seek rescission of the agreement and pursue legal remedies for the breach.

What are the legal implications of rescinding a settlement agreement?

Rescinding a settlement agreement can have significant legal implications. As mentioned earlier, rescission means that the agreement is cancelled, and both parties return to their original positions. This means that any benefits or obligations that arose from the agreement are also cancelled, and the parties are no longer bound by the terms of the agreement.

However, rescinding a settlement agreement can also have implications for any legal proceedings that were affected by the agreement. For example, if the settlement agreement resolved a lawsuit, rescinding the agreement may mean that the lawsuit is revived, and both parties will need to continue with the litigation process.

In conclusion, rescission of a settlement agreement is a serious matter that should not be taken lightly. If you are considering seeking rescission of a settlement agreement, it is important to consult with an experienced attorney who can advise you on your options and help you navigate the legal process. Similarly, if you are a party to a settlement agreement and are concerned about the possibility of rescission, it is important to review the terms of the agreement carefully and ensure that you are meeting your obligations under the agreement to avoid any potential breaches.