What term describes ending a contract by mutual agreement?

• A. Rescission
• B. Cancellation
• C. Nullification
• D. Termination

Answer: (A)

Ending a contract by mutual agreement is rescission. Rescission means both parties agree to cancel the contract and undo what was exchanged, leaving them as if the contract never existed. It’s about restoring the pre-contract positions, so any money or goods swapped are returned and obligations are released.

This differs from termination, which ends the contract for a specified reason or at a specified time but doesn’t automatically restore the parties to their starting point. Cancellation often implies stopping the contract, sometimes by one side or under specific terms, and may not involve reversing exchanges. Nullification would treat the contract as void from the outset, rather than as a mutual undo of the agreement. So, when the key idea is both sides agreeing to end the contract and reset their positions, rescission is the precise term.