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When the United States was conceived in 1776 and1789 the founders were concerned with protecting their rights under British common law. They adopted it as the law of the new United States of America modified only by the limitations placed on the central government by the U.S. Constitution approved in 1789.
The viability and ability to enforce contracts was recognized as essential to commerce. Courts of law were charged with enforcing legitimate contracts. Courts of equity were charged with protecting contracting parties from mistake, fraud, misrepresentation and concealment since enforcing a contract based on mistake, fraud, misrepresentation or concealment would not be fair.” [ Barry Zalma, Rescission of Insurance – 2nd Edition]
The common law developed rules that courts could follow to refuse to enforce the terms of a contract that was entered into because of mutual mistake of material fact, a unilateral mistake of material fact, the breach of warranty (a presumptively material promise to do or not do something), a material concealment, or a material misrepresentation. “The remedy – called rescission – created a method to apply fairness to the insurance contract and allow an insurer to void a contract and allowed courts to refuse to enforce such a contract entered into by misrepresentation or concealment of material facts.” [Barry Zalma, The Equitable Remedy of Rescission, LexisNexis Legal Newsroom Insurance Law, (April 21, 2015), https://www.lexisnexis.com/legalnewsroom/insurance/b/insurancelaw/archive/2015/04/21/the-equitable-remedy-of-rescission-a-tool-to-defeat-fraud.aspx?Redirected=true – See more at: https://searchenginereports.net/matchtext.]
Some plaintiffs’ lawyers contend that rescission is “post loss underwriting” rather than the exercise of a legitimate equitable remedy as old as the common law. In California, one of the biggest proponents of the theory failed to overturn...
