Avoiding Mistakes That Can Take Away Your Right to Rescind Your Commercial Contract in Georgia

When you sign a commercial contract, you do so with the expectation that the other side dealt with you openly and honestly. Sometimes, though, that’s not reality. When you encounter a situation where your contract partner has made a mistake or engaged in fraud with relation to one or more essential contract terms, you have certain legal rights. You must, however, know exactly what to do and when to do it because, if you take the wrong step or act at the wrong time, you could lose those rights due to something called a “waiver.” To make sure you are safeguarding all of your rights and those of your business, you need the protection of an experienced Atlanta commercial contracts lawyer, who can advise and guide you through this potentially tricky process.

Here’s an example of how things can go wrong with a misstep. The underlying commercial contract was one between a healthcare company and a supplier of COVID-19 rapid tests. Before signing the deal, the healthcare company made sure to inquire about the tests’ “general availability.” The healthcare company agreed to the deal based upon the supplier’s assurances that it could supply 3.75 million tests immediately.

The buyer asked the supplier to begin delivering the 3.75 million tests, but the supplier balked. The buyer contacted the manufacturer, who informed the buyer that it only had 1.2 million tests. The buyer asked the supplier to provide it with the 1.2 million tests that the manufacturer had available, but the delivery was not forthcoming.

Several months later, the buyer asked for its deposit back and to rescind the deal. The supplier refused.

The buyer sued for mutual mistake/rescission, unilateral mistake/rescission, unjust enrichment, misrepresentation, and seven other claims. The supplier sought dismissal of the buyer’s claims, and it was largely successful.

A Wrong Step and a Delayed Recission Request Equalled a Waiver

The problem for the buyer was the way that it went about seeking rescission. Georgia law is very clear that a party to a contract “must promptly notify the other party of its intent to rescind ‘as soon as the facts supporting the claim for rescission are discovered.’” The courts have also said that, if you are seeking to get out of a contract based on the other side’s fraud or mistake, you must, immediately after you discover the fraud or mistake, declare your “purpose and adhere to it, otherwise, you lose the option of rescinding.

In this COVID test case, the buyer was aware of the supplier’s fraud or mistake as soon as the manufacturer told the buyer that it had only 1.2 million tests, not the 3.75 million tests that were supposed to be immediately available as per the terms of the contract. If the buyer wanted to rescind, it needed to rescind at that time.

Instead, the buyer asked the supplier to provide partial performance of the agreement by securing the 1.2 million tests the manufacturer had. That action was consistent with affirming the agreement, not rescinding it. Under Georgia law, that conduct amounted to a waiver of the right to rescind.

In many areas of business, it is said that “timing is everything.” That can also be true when it comes to negotiating, drafting, enforcing, or rescinding a commercial contract, especially an agreement where it seems the other side may have misrepresented one or more essential facts. If that happens to you, look to the skilled Atlanta commercial litigation attorneys at Poole Huffman, LLC to be the powerful and diligent legal advocate you need. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation and find out how you can put the power of our knowledge and experience to work for you.