RESCISSION OF CONTRACTSCentral

Section 27 of The Specific Relief Act, 1963

When rescission may be adjudged or refused.

(1)Any person interested in a contract may sue to have it rescinded, and such rescission may be adjudged by the court in any of the following cases, namely:--
1. (a)where the contract is voidable or terminable by the plaintiff;
2. (b)where the contract is unlawful for causes not apparent on its face and the defendant is more to blame than the plaintiff.
(2)Notwithstanding anything contained in sub-section (1), the court may refuse to rescind the contract--
1. (a)where the plaintiff has expressly or impliedly ratified the contract; or
2. (b)where, owing to the change of circumstances which has taken place since the making of the contract (not being due to any act of the defendant himself), the parties cannot be substantially restored to the position in which they stood when the contract was made; or
3. (c)where third parties have, during the subsistence of the contract, acquired rights in good faith without notice and for value; or
4. (d)where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract. Explanation.--In this section "contract" in relation to the territories to which the Transfer of Property Act, 1882 (4 of 1882), does not extend, means a contract in writing.

Summary

Rescission (which means the cancelling or undoing of a contract) can be ordered by a court in certain situations.
It can be ordered where the contract is voidable (which means it can be declared void, or having no legal force, by one of the parties) or where the contract can be terminated (ended) by the plaintiff (the person who files the lawsuit).
It can also be ordered where the contract is unlawful for reasons that are not apparent (not obvious) on its face, and the defendant (the person being sued) is more to blame than the plaintiff.
The court may refuse to rescind the contract if the plaintiff has expressly or impliedly ratified (approved or accepted) the contract.
It can also refuse if circumstances have changed so much since the contract was made that the parties cannot be substantially restored to their original positions, provided this change was not caused by the defendant.
It can refuse if third parties have bought rights under the contract in good faith, for value (valuable payment), and without notice (knowledge) of the dispute.
It can also refuse if only a part of the contract is sought to be cancelled and that part cannot be severed (separated) from the rest of the contract.

Practical examples

1Rohit sells a car to Priya by hiding a major engine defect that he lied about, making the agreement voidable. Priya discovers this on August 10, 2026, and sues to cancel the contract. The court allows it because the contract is voidable by Priya.

2Amit hires Sneha to transport illegal contraband across state lines, which is an unlawful purpose not obvious on the face of the contract. Since Amit is a naive customer and Sneha is a professional smuggler who is more to blame, Amit can sue to rescind the contract.

3David contracts to sell land to Sara. Sara delays, but David accepts partial payment later, which is an implied ratification (approval). When David later sues to cancel, the court refuses because David ratified the agreement.

FAQ

1. What does rescission mean under Section 27?

Rescission means the cancellation or undoing of a contract, which returns the parties to the positions they were in before they entered the agreement.

2. Can a person cancel only a small part of a contract under Section 27?

No, if the part they want to cancel cannot be separated from the rest of the contract, the court will refuse to cancel it.

3. What happens if a third party buys rights in the property before the contract is cancelled?

The court will refuse to cancel the contract if the third party bought those rights in good faith, for valuable payment, and without knowing about the original contract.

4. Can a court refuse to cancel a contract if the situation of the parties has changed?

Yes, if a change in circumstances has occurred since the contract was made, and it is no longer possible to restore the parties to their original positions, the court can refuse to cancel the contract, provided the change was not caused by the defendant.

Test yourself

1.Under Section 27 of The Specific Relief Act, 1963, in which of the following situations may a court adjudge the rescission of a contract?

2.Under Section 27 of The Specific Relief Act, 1963, what is the rule regarding the rescission of only a part of a contract?

3.Under Section 27 of The Specific Relief Act, 1963, what is the definition of a contract in territories where the Transfer of Property Act, 1882, does not extend?

4.Under Section 27 of The Specific Relief Act, 1963, a court may refuse to rescind a contract if the plaintiff has done which of the following?

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