As a real estate attorney in Summerville, South Carolina, I have experience with those who bought a house only to discover that the seller did not disclose an important fact—the entire plumbing system needs to be replaced and you are now responsible for the maintenance costs. Furthermore, the home’s value has dropped significantly since its purchase. Now it is time to rescind the sales contract and seek restitution of the purchase price. In this article, I will explain reasons for rescission and nonperformance in South Carolina.
What Are Reasons for Rescission in South Carolina?
Rescission is a much better option than suing because you would have been limited to the difference between the price paid and the assessed value of the property. A rescission makes sense when the reimbursement of the purchase price is more important than living in the house. If you find yourself in this situation, see if one of these common reasons for rescission applies:
Mutual Consent. A purchase contract may be rescinded by the consent of all parties, regardless of its express terms. Mutual consent may be implied from the parties’ conduct.
Mistake of Law. A purchase agreement may also be rescinded if the rescinding party’s consent is based on a factual or legal mistake. A mistake of fact may be either mutual or unilateral. A unilateral mistake occurs when only one party is mistaken as to the subject matter or the terms contained in the contract agreement.
A mistake of law must be material to warrant rescission; in fact, a material, mutual mistake of law is automatically grounds for rescission. A mistake of law is mutual only when the parties are mistaken in the same way.
Fraud. Common characteristics of a fraudulent property investment include:
The use of straw buyers. A straw buyer is someone who makes a purchase on behalf of another. A straw buyer is used when the real buyer cannot complete the transaction be it credit score, bankruptcy, etc.
Inflated appraisals. The way appraisal fraud works is not as difficult as you may imagine. When the potential homebuyer consults with a mortgage lender about purchasing a home, they receive a “good faith” estimate for the loan. This estimate includes a value for their home. This value is the minimum amount needed to complete the loan. If the value of the property does not meet the minimum amount, appraisers may inflate the value of the home to help ensure the sale.
Steps to take to avoid appraisal fraud include:
- Hiring an independent appraiser –It is well worth the money to know that the risk you are taking is legitimate.
- Use an ethical appraiser –Ensure that your appraiser is state certified.
- Ask for references. Oddly enough, it may be better to look for an appraiser that works for banks rather than one who works for mortgage brokers. Banks will be more likely to hire competent and ethical appraisers.
The use of undue influence by one party over another puts the free will of one of the parties entering the contract into question and therefore leads to the contract being unenforceable and voidable by the victim party. To prove undue influence, a party must show that one party to the contract is a person with weaknesses which make him likely to be affected by such persuasion and that the party exercising the persuasion is someone in a special relationship with the victim that makes the victim especially susceptible to such persuasion.
Examples of undue influence, duress and menace include:
- Using a confidential relationship to receive an unfair advantage.
- Taking advantage of another’s weakness of mind.
- Taking a grossly unfair advantage of another’s distress.
Prejudice to Public Interest. Rescission is also available if the purchase agreement is unlawful for reasons not apparent in its terms and if the parties are not equally at fault.
Failure of Consideration. The State of South Carolina passed laws to help circumvent a situation involving a contract between two parties where one fails to fulfill their end of the deal. The other party may have a restitution or unjust enrichment claim to recover if:
(a) A contract may be rescinded if all the parties thereto consent.
(b) A party to a contract may rescind the contract in the following cases:
(1) If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.
(2) If the consideration for the obligation of the rescinding party fails, in whole or in part, through the fault of the party as to whom he rescinds.
(3) If the consideration for the obligation of the rescinding party becomes entirely void from any cause.
(4) If the consideration for the obligation of the rescinding party, before it is rendered to him, fails in a material respect from any cause.
(5) If the contract is unlawful for causes which do not appear in its terms or conditions, and the parties are not equally at fault.
(6) If the public interest will be prejudiced by permitting the contract to stand.
Nonperformance or Breach in South Carolina
One party to a contract may rescind it due to substantial nonperformance or breach by the other party. The party who knowingly fails to fulfill obligations under a contract cannot argue that the contract has injured them by its termination. Rescinding the offer is permitted only when the breach is so substantial that it defeats the parties in making the agreement.
If you are in a contract agreement and feel the need to rescind, there may be many remedies available to you. Contact the Watts Law Firm and I will walk you through options and discuss strategies for a successful outcome. The purchase of a home is one your largest investments and it is important to get what you pay for. Contact the Watts Law Firm and let’s get started.