Recission of Contracts

Division 3, Part 2, Title 5 of the Civil Code deals with the extinction of contracts. Chapter 2 deals with recissions. Section 1688 provides that a contract is extinguished by its rescission.

Section 1689 allows a contract to be rescinded if all the parties thereto consent. A party to a contract may rescind the contract in seven specified cases.

Section 1689.2 says that a participant in an endless chain scheme may rescind the contract upon which the scheme is based, and may recover all consideration paid pursuant to the scheme, less any amounts paid or consideration provided to the participant pursuant to the scheme. In addition, the court may, upon motion, award reasonable attorney’s fees to a prevailing plaintiff.

Section 1689.3 states that any patient who contracts directly with a dental office or plan for services may rescind the contract or plan until midnight of the third business day after the day on which the patient signs the contract or plan. If services have been provided to the patient, the dental office is entitled to compensation for those services.

Section 1689.5 defines the terms “home solicitation contract or offer,” “appropriate trade premises,” “goods,” “services,” “business day,” and “senior citizen.”

Section 1689.6 explains that the buyer has the right to cancel a home solicitation contract or offer until midnight of the third business day, or until midnight of the fifth business day if the buyer is a senior citizen, after the day on which the buyer signs an agreement or offer to purchase which complies with Section 1689.7.

Section 1689.7 says that, in a home solicitation contract or offer, the buyer’s agreement or offer to purchase must be written in the same language as principally used in the oral sales presentation, be dated, be signed by the buyer, and contain in immediate proximity to the space reserved for the buyer’s signature, a conspicuous statement in a size equal to at least 10-point boldface type, as specified.

Section 1689.8 says that every home solicitation contract or offer for home improvement goods or services which provides for a lien on real property is subject to the provisions of specified laws. The term “home improvement goods or services.”

Section 1689.9 states that, where the goods sold under any home solicitation contract are so affixed to real property as to become a part thereof, whether or not severable therefrom, the buyer does not have the right to cancel if, subsequent to his signing the contract, he has sold or encumbered the real property to a bona fide purchaser or encumbrancer who was not a party to such sale of goods or to any loan agreement in connection therewith.

Section 1689.10 provides that, within 10 days after a home solicitation contract or offer has been canceled, the seller must tender to the buyer any payments made by the buyer and any note or other evidence of indebtedness. If the downpayment includes goods traded in, the goods must be tendered in substantially as good condition as when received.

Section 1689.11 states that, within 20 days after a home solicitation contract or offer has been canceled, the buyer, upon demand, must tender to the seller any goods delivered by the seller pursuant to the sale or offer, but he is not obligated to tender at any place other than his own address. If the seller fails to demand possession of goods within 20 days after cancellation, the goods become the property of the buyer without obligation to pay for them.

Section 1689.12 states that any waiver or confession of judgment of the specified provisions is deemed contrary to public policy and is void and unenforceable.

Section 1689.13 explains that Sections 1689.5, 1689.6, 1689.7, 1689.10, 1689.12, and 1689.14 do not apply to a contract that meets four specified requirements.

Section 1689.14 provides that any home solicitation contract or offer for the repair or restoration of residential premises signed by the buyer on or after the date on which a disaster causes damage to the residential premises, but not later than midnight of the seventh business day after this date, is void, unless the buyer or his or her agent or insurance representative solicited the contract or offer at the appropriate trade premises of the seller.

Any contract covered by this subdivision is not void if solicited by the buyer or his or her agent or insurance representative regardless of where the contract is made. The terms “buyer solicitation” and “disaster” are defined.

Section 1689.15 states that a contractor who is duly licensed may commence work on a service and repair project as soon as the buyer receives a signed and dated copy of a service and repair contract that meets all of the contract requirements specified in Section 7159.10 of the Business and Professions Code. The buyer retains any right of cancellation applicable to home solicitations until the time as the buyer receives a signed and dated copy of a service and repair contract that meets all of the contract requirements specified in Section 7159.10 of the Business and Professions Code.

Section 1689.20 explains that, in addition to any other right to revoke an offer, the buyer has the right to cancel a seminar sales solicitation contract or offer until midnight of the third business day, or until midnight of the fifth business day if the buyer is a senior citizen, after the day on which the buyer signs an agreement or offer to purchase which complies with Section 1689.21.

Section 1689.21 says that, in a seminar sales solicitation contract or offer, the buyer’s agreement or offer to purchase must be written in the same language as principally used in the oral sales presentation, dated, signed by the buyer, and contain in immediate proximity to the space reserved for the buyer’s signature, a conspicuous statement in a size equal to at least 10-point bold type, as specified.

In addition, the agreement or offer to purchase must contain on the first page, in a type size no smaller than that generally used in the body of the document, each of three specified statements. The agreement or offer to purchase has to be accompanied by a completed form in duplicate, captioned “Notice of Cancellation.”

Section 1689.22 provides that, within 10 days after a seminar sales solicitation contract or offer has been cancelled, the seller must tender to the buyer any payments made by the buyer and any note or other evidence of indebtedness. If the downpayment includes goods traded in, the goods must be tendered in substantially as good condition as when received.

Section 1689.23 says that, within 20 days after a seminar sales solicitation contract or offer has been canceled, the buyer, upon demand, must tender to the seller any goods delivered by the seller pursuant to the sale or offer, but he or she is not obligated to tender at any place other than his or her own address. If the seller fails to demand possession of goods within 20 days after cancellation, the goods become the property of the buyer without obligation to pay for them.

Section 1689.24 defines the terms: “seminar sales solicitation contract or offer,” “seminar setting,” “goods,” “services,” “business day,” and “senior citizen.”

Section 1690 provides that a stipulation that errors of description cannot avoid a contract, or be the subject of compensation, or both, does not take away the right of rescission for fraud, nor for mistake, where the mistake is in a matter essential to the inducement of the contract, and is not capable of exact and entire compensation.

Section 1691 says that, in order to effect a rescission a party to the contract must, promptly upon discovering the facts which entitle him to rescind if he is free from duress, menace, undue influence or disability and is aware of his right to rescind, do two specified acts.

Section 1692 explains that, when a contract has been rescinded in whole or in part, any party to the contract may seek relief based upon the rescission by bringing an action to recover any money or thing owing to him by any other party to the contract as a consequence of such rescission or for any other relief to which he may be entitled under the circumstances or asserting the rescission by way of defense or cross-complaint.

Section 1693 says that, when relief based upon rescission is claimed in an action or proceeding, the relief is not denied because of delay in giving notice of rescission unless such delay has been substantially prejudicial to the other party.