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RESCISSION IS NOT APPROPRIATE WHERE THE PARTIES CANNOT BE RETURNED TO THE STATUS QUO; A BREACH OF CONTRACT CAUSE OF ACTION MUST BE DISMISSED IF DAMAGES ARE NOT ESTABLISHED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined defendant’s motion for summary judgment on the counterclaims for rescission and breach of contract should not have been granted. Rescission is only appropriate when the parties to a contract can be returned to the status quo, not the case here. And a breach of contract action must be supported by damages, which were not established here:

A claim for rescission, as opposed to a claim for breach of contract, seeks to ” ‘restore the parties to status quo,’ ” as if the parties had never entered into the contract … . Rescission sounds in equity … , and is appropriate only where, among other things, the status quo can be ” ‘substantially restored’ ” … . In this case, rescission is unavailable because the status quo cannot be substantially restored. Here, “the assimilation of plaintiff’s company [into defendant’s business is] complete,” and events have rendered the status quo practically impossible to recreate … . …

… [T]he court erred in granting judgment to defendant on his two counterclaims for breach of contract. Damages are an element of a claim for breach of contract … and, here, defendant’s counterclaims for breach of contract should have been dismissed upon the court’s determination that defendant failed to establish damages … . Unger v Ganci, 2021 NY Slip Op 07366, Fourth Dept 12-23-21

 

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