## Facts

- Pacific Air Industries, Inc. sold photogrammetric franchise territories and advertised for franchisees.
- E. T. Runyan responded and, after discussions, agreed to purchase an exclusive franchise for specified California counties.
- Before the written “area service contract” was executed, Runyan resigned from his job with Tidewater Oil Company.
- Runyan paid $25,000 for the franchise and relied in part on Pacific’s income projections.
- Pacific promised training, initial sales and technical assistance, and provision of premises and equipment needed for franchise operations.
- The training and support provided were materially deficient, and Pacific did not adequately perform key obligations, including operational support and maintaining exclusivity.
- Runyan rescinded the contract, seeking restitution of the $25,000 and additional losses tied to leaving his prior employment.

## Issues

1. After a valid rescission under California Civil Code § 1692, may a court award consequential damages in addition to restitution, or are damages and rescission mutually inconsistent remedies?

## Decision

- The California Supreme Court affirmed the award of consequential damages in addition to restitution.
- The court held that Civil Code § 1692 authorizes “complete relief” following rescission, including restitution and consequential damages, so long as the award avoids double recovery and equitably adjusts the parties’ positions.
- The trial court’s calculation—offsetting Runyan’s franchise earnings against claimed lost salary—was a permissible method to prevent duplication.

## Legal Principles

- California Civil Code § 1692 permits a court, after rescission, to grant complete relief, including restitution and consequential damages to which the rescinding party is entitled.
- Consequential damages awarded after rescission are not treated as an affirmance of the contract; they compensate losses proximately caused by entering into and acting under a transaction that is undone.
- Remedies following rescission must avoid double recovery and may include offsets and other adjustments necessary to reach an equitable result.

## Conclusion

When a contract is properly rescinded in California, the court may award restitution plus consequential damages caused by the transaction under Civil Code § 1692, provided the relief is structured to prevent duplicate recovery and to fairly adjust the equities between the parties.


Runyan v. Pac. Air Indus., Inc., 2 Cal. 3d 304, 466 P.2d 682 (Cal. 1970)