Rescission of a Contract in California: Grounds, Notice, and Restoration

Last updated: November 2026

Rescission in California unwinds a contract rather than enforcing it. A party may rescind by mutual consent, or on its own when its consent was obtained by fraud, mistake, duress, or undue influence, or when the consideration it was promised fails. To rescind, the party must promptly give notice and restore, or offer to restore, what it received. The contract is then extinguished and each side returns what it got. Kolmogorov Law, P.C. handles rescission claims and defenses for businesses in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss a contract your business wants to undo, or one the other side is trying to undo.

What rescission of a contract in California does

A contract is extinguished by its rescission. (Civ. Code, § 1688.) A breach of contract claim asks the court to give you the benefit of the deal. Rescission asks the court to treat the deal as if it never happened and put both sides back where they started.

A buyer who was lied to about a company's revenue can keep the company and sue for the difference in value, or give it back and recover the price. The second path has procedural requirements the first does not.

Grounds for rescission

Any contract may be rescinded if all parties consent. (Civ. Code, § 1689, subd. (a).) Mutual rescission is just a new agreement.

Unilateral rescission is the contested kind. A party may rescind on its own when its consent was given by mistake, or obtained through duress, menace, fraud, or undue influence exercised by or with the connivance of the other party. (Civ. Code, § 1689, subd. (b)(1).) It may also rescind when the consideration for its obligation fails through the other party's fault, becomes entirely void, or fails in a material respect before it is rendered. (Civ. Code, § 1689, subd. (b)(2)-(4).) Narrower grounds cover contracts unlawful for reasons not apparent on their face and contracts whose continuation would prejudice the public interest. (Civ. Code, § 1689, subd. (b)(5), (6).)

Fraud is the ground I see most. A material misrepresentation that induced the deal generally supports rescission even where it was negligent rather than deliberate, though the proof differs. Our fraud claims page covers the elements.

How to rescind a contract: notice and the offer to restore

Rescission in California is accomplished by the party, not by the court. Promptly after discovering the facts that entitle it to rescind, the party must give notice of rescission to the other side. It must also restore everything of value it received under the contract, or offer to restore it on condition that the other side do the same. (Civ. Code, § 1691.) The offer is excused if the other party is unable or positively refuses to restore.

In practice this means a written notice that identifies the contract, states the ground, declares the contract rescinded, and tenders back the money, goods, or shares received.

If no notice or offer was sent before suit, service of a pleading seeking relief based on rescission is deemed to be both. (Civ. Code, § 1691.) That is a safety net, not a plan. A clear notice sent early fixes the date and often produces a negotiated unwind before anyone files.

Delay and the deadline

Delay matters in two ways.

First, relief will not be denied because of delay in giving notice or restoring benefits unless the delay was substantially prejudicial to the other party, and the court may make tender of restoration a condition of its judgment. (Civ. Code, § 1693.) A party that keeps using the asset for a year while deciding what to do invites a prejudice argument.

Second, there is a limitations period. An action based on rescission of a written contract must be brought within four years. The clock runs from the date the facts entitling the party to rescind occurred, or, where the ground is fraud or mistake, from discovery of those facts. (Code Civ. Proc., § 337, subd. (c).) For a contract not in writing, the period is two years with the same accrual rule. (Code Civ. Proc., § 339, subd. 3.)

What the court can award

Once a contract has been rescinded, a party may sue to recover any money or thing owed as a consequence, or assert the rescission as a defense or cross-complaint. (Civ. Code, § 1692.) The aggrieved party is to receive complete relief, including restitution of the benefits it conferred and any consequential damages it is entitled to, without duplicate or inconsistent recovery. (Civ. Code, § 1692.) A claim for damages is not inconsistent with a claim based on rescission, and the court may adjust the equities between the parties. (Civ. Code, § 1692.)

If the court finds the contract was not validly rescinded, it may still grant any other relief a party is entitled to. (Civ. Code, § 1692.) Our contract damages page covers the damages side, and our unjust enrichment page covers restitution where no contract survives.

How rescission comes up for business owners

A buyer closes on a small company after reviewing financial statements that turn out to have been inflated. The buyer can rescind: notice, tender the shares back, demand the price. Or it can keep the company and sue for fraud damages. Our guide to buying or selling a small business covers the diligence that avoids this.

A software customer pays an annual license fee for a product that never functions as warranted. The consideration has failed in a material respect. Rescission returns the fee; the vendor argues the customer waited too long and kept using the product.

What we do, and where these cases are heard

We evaluate whether rescission or damages serves the client better, draft the notice and the tender, and litigate the claim or the defense. On the defense side, the usual arguments are that the rescinding party knew the facts and waited, kept the benefits, or has no ground at all. Our defenses page covers the broader toolkit.

Rescission cases are heard in the Superior Court: the Central Justice Center in Santa Ana for Orange County and the Stanley Mosk Courthouse for Los Angeles. Cases with diversity or federal claims go to the Central District of California. See our breach of contract practice page for how we approach these matters.

What to bring to the first meeting

Bring the contract, the representations or documents you relied on, and proof of what you paid or delivered. Also bring the date you discovered the problem, any notice you have already sent, and a candid account of how you have used what you received since.

Frequently asked questions

How do you rescind a contract in California?

Give written notice of rescission to the other party promptly after discovering the facts that entitle you to rescind. Restore, or offer to restore, everything of value you received, on condition that the other side does the same. (Civ. Code, § 1691.) If you sue without doing this first, service of the complaint counts as the notice and the offer, but an early notice is better.

Can one party rescind a contract without the other's agreement?

Yes, on specified grounds. A party may rescind unilaterally when its consent was given by mistake or obtained by duress, menace, fraud, or undue influence, or when the consideration it was promised fails. (Civ. Code, § 1689, subd. (b).) The other side can contest whether the ground exists, which is what the lawsuit is about.

What is the deadline to rescind a contract?

An action based on rescission of a written contract must be filed within four years from when the facts entitling you to rescind occurred; for fraud or mistake, the clock starts at discovery. (Code Civ. Proc., § 337, subd. (c).) Oral contracts get two years. (Code Civ. Proc., § 339, subd. 3.) Separately, delay that prejudices the other side can defeat relief. (Civ. Code, § 1693.)

Do I have to give back what I received?

Yes, or offer to. Restoration, or a conditional offer to restore, is part of effecting the rescission. (Civ. Code, § 1691.) The court can make tender a condition of judgment and can adjust the equities if you used or consumed what you received. (Civ. Code, §§ 1692, 1693.) Keeping the benefit while claiming rescission is the most common way these claims fail.

Can I get damages and rescission?

A claim for damages is not inconsistent with a claim based on rescission, and the aggrieved party is entitled to complete relief, including restitution and consequential damages, without duplicate recovery. (Civ. Code, § 1692.) You cannot keep the deal and undo it at the same time, but you can plead both and let the facts decide.

Talk to a California breach of contract attorney

If your business needs to unwind a contract, or is defending a rescission claim, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract, the facts, and the court.