What is rescission and when can I rescind a contract in Ontario?

Rescission unwinds a contract as if it never existed, returning both parties to their pre-contract positions. It is different from termination for breach, which ends a valid contract from a point forward. Rescission treats the agreement as void from the outset.

In Ontario, rescission is available in a limited set of circumstances. The most common is misrepresentation — where one party was induced to enter the contract by a false statement of fact made by the other, even if not fraudulent. Fraudulent or negligent misrepresentation typically supports both a rescission claim and a damages claim; innocent misrepresentation may support rescission alone.

Rescission is also available for mistake (in narrow circumstances), duress, undue influence, or non-disclosure where a duty to disclose existed. Courts may rescind a contract for unconscionability as well.

However, the right to rescind can be lost. If you affirm the contract after discovering the misrepresentation (by continuing to perform or accepting benefits), if third-party rights arise, or if too much time passes, rescission may no longer be possible and you may be left with damages as the only remedy.

Act quickly if you believe you have grounds to rescind, and document the misrepresentation clearly.