Contracts and Sales Multistate Bar Practice Exam

What requirement must be met for mutual rescission to be valid under common law?

1. It must be in writing

2. Both parties must provide consideration

3. It must be notarized

4. There must be a court order

The correct answer is: Both parties must provide consideration

For mutual rescission to be valid under common law, the requirement that both parties must provide consideration is essential. Mutual rescission involves both parties agreeing to cancel the existing contract, and this agreement constitutes a new contract where each party gives something up, or refrains from requiring performance of the original contract. This exchange of consideration is what makes the rescission enforceable. Without consideration, the new agreement to rescind could be deemed a mere promise, which is not enough to create a binding contract. This principle reflects the broader contract law doctrine that states contracts require consideration to be enforceable. Mutual rescission essentially relies on the parties relinquishing their rights and obligations under the original contract, which serves as the basis for the new agreement between them. In terms of the other options, while a written agreement may be advisable for clarity and enforcement purposes, it is not a strictly necessary condition for mutual rescission to be valid under common law. Similarly, notarization and a court order are generally not prerequisites for rescinding a contract, as mutual rescission can be agreed upon without formal legal intervention if the necessary elements, including consideration, are present.