218. Rescission

It is sometimes said that the objective of rescission or cancellation is to restore the status quo, and not to punish the transgressor or reward the victim. See Ehrlich v. United States, 252 F.2d 772 (5th Cir. 1958) (rescission granted due to use of strawman to acquire the benefits of veterans' housing). When the United States is a party to a transaction, public policy considerations may be such as to justify rescission, without the need for an offer to return the other party's consideration. See Causey v. United States, 240 U.S. 399 (1916) (false affidavit executed to obtain preliminary entry on public lands looking to acquisition of a patent thereto). Public policy justifies the cancellation of contracts even if there is no express provision for cancellation in the law relied on. See United States v. Acme Process Equipment Co., 385 U.S. 138 (1966) (kickbacks). Thus, in United States v. Mississippi Valley Generating Co., 364 U.S. 520, 563-66 (1961) (conflict of interest), the policy expressed in the criminal statute relied on by the Court was said to leave no room for equitable considerations on behalf of the offending party. Similarly, in Pan American Petroleum & Transport Co. v. United States, 273 U.S. 456, 506 (1927) (conspiracy to defraud), the Court declined to apply equitable principles to frustrate the purpose of the government's laws or thwart public policy. Relief was not conditioned on the return of the consideration, id. at 510, nor would the Court allow the offending party the cost of improvements made by it. See id., p. 509.

Updated September 19, 2018