The essential elements of contract formation:

1. parties capable of contracting;
2. consent;
3. a lawful object; and
4. consideration.

(Civ. Code, § 1550.)

The manifestation of mutual consent is typically established by an offer and acceptance; and “‘determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.’ [Citation.]” (Deleon v. Verizon Wireless, LLC (2012) 207 Cal.App.4th 800, 813.)

Recission Defined

Rescission is a remedy and not a cause of action. (See Nakash v. Superior Court (1987) 196 Cal.App.3d 59, 70.)

“A contract is extinguished by its rescission.” (Civ. Code, § 1688.) The substantive grounds for rescission are set forth in Civil Code section 1689, et seq., and include when consent was given by mistake. (Civ. Code, § 1689(b)(1).)

The requirements for rescission:

1. the contract,
2. the grounds for rescission, and,
3. if the ground is the other party's breach or failure of consideration, the rescinding party's own performance.

The procedure for effecting rescission is set forth in Civil Code section 1691. That provision requires that the rescinding party give notice of the rescission together with an offer to restore any consideration received. “[T]he service of a pleading in an action or proceeding that seeks relief based on rescission shall be deemed to be such notice or offer or both.” (Civ. Code, § 1691.)

Prior to 1961, there were “‘two types of action for rescissionary relief’ – the first an ‘an action to enforce a rescission’ and the second ‘an action to obtain a rescission.’” (Runyan v. Pacific Air Industries, Inc. (1970) 2 Cal.3d 304, 312.) In 1961, the Legislature “abolished the action to obtain court rescission and left only an action to obtain relief based upon a party effected rescission.” (Paularena v. Superior Court (1965) 231 Cal.App.2d 906, 913.)

Rescission Based on Mistake of Fact

“A party may rescind a contract if his or her consent was given by mistake.” (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 279 citing Civ. Code Sec. 1689(b)(1).) “A factual mistake by one party to a contract, or unilateral mistake, affords a ground for rescission in some circumstances.” (Id.) “Civil Code section 1577 states in relevant part: ‘Mistake of fact is a mistake, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in: [¶] 1. An unconscious ignorance or forgetfulness of a fact past or present, material to the contract... ’” (Id.)

Where the plaintiff has no reason to know of and does not cause the defendant's unilateral mistake of fact, the defendant must establish the following facts to obtain rescission of the contract:

1. the defendant made a mistake regarding a basic assumption upon which the defendant made the contract;
2. the mistake has a material effect upon the agreed exchange of performances that is adverse to the defendant;
3. the defendant does not bear the risk of the mistake; and
4. the effect of the mistake is such that enforcement of the contract would be unconscionable.

(Donovan v. RRL Corp. (2001) 26 Cal. 4th 261, 282.)