Facts
- Buyers and sellers entered a contract in June 1978 for the sale of the sellers’ house.
- The buyers moved in about two months later and soon discovered a termite infestation.
- The buyers filed an equitable action seeking rescission of the purchase-and-sale contract and damages, alleging the sellers knew of and misrepresented the termite condition.
- After viewing the premises, the trial court found the conveyance rested on a mutual mistake of material fact regarding the termite condition.
- The trial court granted rescission and related relief.
Issues
- Whether rescission was a proper equitable remedy for a home sale contract formed under a mutual mistake of material fact (termite infestation).
- Whether rescission should be denied because the parties allegedly could not be restored to the status quo after the sellers bought another home.
- Whether rescission should be denied because it would impose undue hardship on the sellers.
Decision
- The New Hampshire Supreme Court affirmed the decree granting rescission.
- Rescission is an equitable, discretionary remedy, and the trial court acted within its discretion in ordering it.
- The ability to restore the status quo is not a literal requirement; equity requires only what is reasonably possible under the circumstances.
- The sellers’ purchase of another house did not, by itself, prevent restoration to the status quo or establish undue hardship.
- The trial court’s finding that the buyers returned the house in the same condition in which they received it supported rescission.
Legal Principles
- Rescission is an equitable remedy committed to the trial court’s discretion based on the facts of the case.
- A court considering rescission must assess whether the parties can be returned as nearly as possible to their pre-contract positions and whether rescission would impose undue hardship on the defendant.
- The status quo requirement is flexible; absolute restoration is not required when equity can accomplish reasonable restoration.
- In residential sales, post-sale changes such as the seller’s purchase of another home are common and do not automatically bar rescission.
Conclusion
The court upheld rescission of a home sale contract formed under a mutual mistake about a material termite infestation, holding that equity does not demand literal restoration to the pre-contract status quo and that foreseeable post-sale circumstances, without more, do not establish undue hardship sufficient to deny rescission.