Abstract
Common law contract in the United States does not offer any reliable avenue by which to rescind a contract as a result of financial crisis. Most formal doctrines eschew taking into account the economic vulnerability of a party where that vulnerability is not the product of the contract itself. More generally, the legal position of parties tends not to turn on their economic resources and market fluctuation is regarded as a foreseeable risk that contracting parties assume. Nevertheless, a few targeted statutory developments use the possibility of rescission to advance public policy goals that implicate particular kinds of transactions, such as home mortgage agreements.
This article is also published in the Journal “American Journal of Comparative Law” upon whose approval, was updated later by the author.
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Notes
- 1.
Restatement (Second) of Contract §164.
- 2.
See, e.g., Your Guide to the Massive Bank Lawsuits, 9/5/11 Bus. Insider. (describing suit by Federal Housing Finance Agency against seventeen banks seeking to rescind more than $196 billion in sales of mortgage-backed securities).
- 3.
Restatement (Second) of Contracts §§ 261–72 (discussing impracticability , impossibility and frustration). See also Trakman (1985) Winner Take Some: Loss Sharing and Commercial Impracticability, 69 Minn. L. Rev. 472 at 472–73.
- 4.
See Northern Indiana Public Service Co. v. Carbon County Coal Co., 799 F.2d 265, 276–78 (7th Cir. 1986).
- 5.
See Fransmart, L.L.C. v. Freshii Dev., L.L.C., 768 F.Supp.2d 851, 870–71 (E.D. Va. 2011) (“The substantive terms of the contract must be so grossly inequitable that it ‘shocks the conscience.”’ (citation omitted)).
- 6.
See Lawrence v. Beverly Manor, 273 S.W.3d 525, 531 (Mo. 2009) (requiring both substantive and procedural unsconscionability).
- 7.
Restatement (Second) of Contracts §208 (“If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract.”) (emphasis added).
- 8.
Restatement (Second) of Contracts § 89 (on modification of an executory contract).
- 9.
See 15 U.S.C. § 1635 (2012).
- 10.
See 42 U.S.C. § 300gg-12 (2012).
- 11.
Robert Robbins, Regulation D Offerings and Private Placements, SU032 ALI-ABA 577 (2013).
- 12.
See Stoiber v. SEC, 161 F.3d 745, 753 (D.C. Cir. 1998) (affirming sanctions notwithstanding defendant’s rescission offer).
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Bagchi, A. (2016). Financial Crisis and the Remedy of Rescission in the United States. In: Başoğlu, B. (eds) The Effects of Financial Crises on the Binding Force of Contracts - Renegotiation, Rescission or Revision. Ius Comparatum - Global Studies in Comparative Law, vol 17. Springer, Cham. https://doi.org/10.1007/978-3-319-27256-6_18
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DOI: https://doi.org/10.1007/978-3-319-27256-6_18
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