If fraud occurs, what remedy allows the injured party to undo the contract?

• A. Specific Performance
• B. Damages
• C. Reformation
• D. Rescission

Answer: (D)

When fraud occurs, the injured party can seek rescission, which cancels the contract and restores both parties to their positions before the agreement. Because fraud induced the deal, the contract is voidable at the injured party’s option, so undoing the bargain is appropriate rather than seeking damages for losses. Rescission requires returning any goods or money exchanged, aiming to put everyone back to status quo ante.

This differs from other remedies: damages compensate for losses without undoing the contract, specific performance would force compliance with the contract, and reformation would modify the contract to reflect the true terms rather than canceling it. For example, if a buyer was misled about a car’s condition, rescission would allow returning the car and getting a refund, restoring the pre-contract situation.