Affiliate Broker Tennessee (TN PSI) National Practice Exam `

What type of agreement is rescission considered to be in the context of contract cancellation?

1. A unilateral

2. A mutual

3. A conditional

4. An implied

The correct answer is: A mutual

Rescission is considered a mutual agreement in the context of contract cancellation because it requires the agreement and consent of all parties involved to void the original contract. In a rescission, both parties must come to a consensus to undo the obligations and responsibilities that were established in the original agreement. This mutual acknowledgment signifies that both sides agree to terminate the contract and return to the state they were in before the contract was enacted, effectively nullifying any rights or duties defined within it. This understanding of mutuality is key because it distinguishes rescission from unilateral actions where only one party makes a decision that affects the contract. In cases of rescission, all parties involved must actively participate in the decision to cancel the contract.