Legal Memorandum: Rescission of Contract in VA

Issue: Under Virginia law, when does a breach of contract give rise to a right to cancel or terminate the contract?

Area of Law: Business Organizations & Contracts
Keywords: Rescission of the contract; Substantial nonperformance or breach; Material breach
Jurisdiction: Virginia
Cited Cases: 215 Va. 782; 208 Va. 89; 101 S.E.2d 580; 232 Va. 203; 14 S.E.2d 337; 899 F. Supp. 1490; 132 F.2d 887
Cited Statutes: Restatement (Second) of Contracts § 241
Date: 12/01/2000

In 17A Am. Jur. 2d Contracts § 570, it is stated:

Although contracts do not terminate as a matter of course on a breach, they may be terminable therefor.  In a case in which the default is of such a nature as to justify the party not in default in terminating the contract, the defaulter is presumed to assent to such termination.  The breach of one party may in such case be treated by the other as an abandonment of the contract authorizing him, if he chooses to do so, to disaffirm it, and thus the assent of both parties is sufficiently manifested.  Considerations of hardship cannot prevail to set up and enforce a broken agreement which in law results in giving to the opposite party a right to treat the agreement as ended.

The same treatise further states:

The general rule is that a contract may be rescinded for substantial nonperformance or breach, and ordinarily a material breach warrants rescission.  There may be a rescission if there is a failure to perform a substantial part of the contract or one or more of its essential terms or conditions, or if  there is such a breach of a contract as substantially defeats its purpose.

.Id. § 573.

In determining whether a nonperformance or breach is  material, the following circumstances are significant under the Restatements(Second) of Contracts:

(a) the extent to which the injured party will be deprived of the benefit which […]


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