California Real Estate Broker ExaminationContractsEasy
A buyer and seller have a signed purchase agreement. Before the close of escrow, the buyer discovers that the property has significant structural defects that were not disclosed. The buyer wants to terminate the contract and recover their earnest money. Which legal remedy would the buyer most likely pursue?
- ADamages
- BRescission
- CSpecific performance
- DReformation
Show answer & explanationAnswer & explanation
Correct answer: B. Rescission
Rescission is the act of canceling a contract and restoring the parties to their positions before the contract was made. This is the appropriate remedy when there's a material misrepresentation or undisclosed defect.
Why the other options are wrong
- A. Damages would seek monetary compensation for the breach, but the buyer's primary goal is to terminate the contract.
- C. Specific performance compels the breaching party to fulfill the contract, which is not what the buyer wants here.
- D. Reformation is used to correct errors in a written contract to reflect the true agreement of the parties, not to terminate it.
Rescission
The cancellation of a contract, returning the parties to their original positions as if the contract had never existed.
- Undoes the contract
- Often used in cases of fraud, mistake, or misrepresentation
- Requires restoration of benefits exchanged
Memory trick: Remember 'Rescind' means to 'send back' to the start.