Which termination occurs when both parties mutually cancel the contract, typically with retroactive effect?

Which termination occurs when both parties mutually cancel the contract, typically with retroactive effect?

• A. By performance
• B. Mutual agreement
• C. Recession
• D. Accord & satisfaction

Answer: (C)

Mutual cancellation with retroactive effect is rescission. When both parties agree to rescind, the contract is treated as if it never existed, and the parties are returned to their pre-contract positions. This retroactive nullification is why rescission best fits the description. Note that the term in the option is typically spelled “rescission” rather than “recession.” By performance ends only after duties are fully carried out, and accords and satisfaction or a simple mutual termination can create different outcomes rather than a retroactive cancellation of the entire contract.

Mutual cancellation with retroactive effect is rescission. When both parties agree to rescind, the contract is treated as if it never existed, and the parties are returned to their pre-contract positions. This retroactive nullification is why rescission best fits the description. Note that the term in the option is typically spelled “rescission” rather than “recession.” By performance ends only after duties are fully carried out, and accords and satisfaction or a simple mutual termination can create different outcomes rather than a retroactive cancellation of the entire contract.