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Rescission as a Remedy in Tennessee Breach of Contract Real Estate Cases

Tennessee law permits, under certain circumstances, a buyer of real estate to rescind a real estate contract and to recover any monies paid towards the real estate. If a Tennessee court allows rescission, the buyer will receive, at least, the amount he or she paid for the property. Moreover, a buyer may be entitled to receive compensation for permanent improvements made to the property in some situations, in addition to receiving a refund of the purchase price.

Rescission is an equitable remedy. Equitable remedies are left to the discretion of the trial court.  For that reason, there is no legal formula to apply to each case in order to know, in advance of a ruling by the court, whether rescission will or will not be granted.  In many cases,  an experienced Tennessee real estate contract lawyer will probably be able to give you some general estimation of your chances of obtaining a rescission.

Tennessee courts do not take rescission lightly: Under Tennessee law, the remedy of rescission will be allowed only in circumstances where fairness demands it. It is most likely to be allowed in cases where a seller has committed fraud. In fact, fraud by a seller of real estate in Tennessee renders the real estate contract voidable.  However, even where the seller has committed fraud and the real estate contract is voidable; it is possible that a Tennessee court will make an award of damages instead of rescinding the contract and refunding the purchase price.

While rescission is requested in many real estate contract cases in Tennessee involving fraud, it can also be granted even when the seller did not commit fraud, but where the seller and buyer both made a mutual mistake. For rescission to be granted in a case of mutual mistake, the mistake with respect to the parties’ contract must have been mutual; the mistake must have been as to a material term of the contract; and the buyer must not have been negligent in failing to realize the mistake.

Here are some Tennessee real estate cases involving breach of contract claims and fraud claims in which rescission was allowed:

Isaacs v. Bokor, 566 S.W.2d 532 (Tenn. 1978): The buyer entered into a real estate sales contract and building contract.  The Court found that neither the seller, nor the buyer, nor even the architect, realized that the site selected for the location of the home to be built was outside of the boundaries of the land purchased by the buyer.  In addition to allowing the buyer to rescind, the Court held that it was proper to allow the buyer to recover damages for improvements buyer made to the property.

Chastain v. Billings, 570 S.W.2d 866: (Tenn. Ct. App. 1978): Rescission allowed because house so defectively constructed that it could be repaired only with “unusually high costs.”

Robinson v. Brooks, 577 S.W.2d 207: (Tenn. Ct. App. 1978): Rescission allowed to seller who purchased home on unstable soil subject to landslides. Purchase price of land and home was $140,000.00. The estimated cost to stabilize the soil around the house was $47,000.00, which cost did not include any repairs to the home which was damaged by landslide.

 

Here are some Tennessee real estate cases where the courts found that rescission was not an appropriate remedy and did not allow rescission:

Tamco Supply v. Pollard, 37 S.W.3d 905 (Tenn. Ct. App. 2001):  Buyer who bought land “in gross” as opposed to “by the acre” denied rescission where it only received 17.5% less land than it thought it was buying.

Croft v. Gentry, 232 S.W.2d 424 (Tenn. Ct. App. 1949): Buyers paid $15,905.00 for over four acres of land.  Sellers did not have title to eight tenths of one acre which was “low and swampy” and valued at $150.00.