Rescission is a proper remedy when the breach of contract is so substantial and fundamental as to defeat the object of the parties in making the agreement.
Plaintiff sent a purchase order for a turbine nozzle to defendant. Plaintiff later filed a suit against defendant, seeking rescission of the contract. In its complaint, plaintiff alleged that it agreed to purchase a turbine nozzle from defendant for $30,000; that the parties' purchase agreement was subject to inspection, and acceptance by end user, a Singapore company; that defendant subsequently learned the real end user was probably located in Iran; and that defendant could not legally export the nozzle under those circumstances. The district court entered judgment in favor of plaintiff and against defendant for rescission of the contract. Defendant appealed. The appellate court reversed the district court’s decision and remanded the case.
Did the district court err in granting the rescission of the contract?
Defendant's generalized knowledge that plaintiff intended to resell the nozzle to a customer in Asia was insufficient to find supervening frustration. There was no evidence that plaintiff could not export the nozzle to Malaysia. The nozzle, as a "dual use" item, was exportable - just not to the intended buyer, but that was because of Immigration and Customs Enforcement’s belief that the buyer's principals were moving embargoed goods to Iran. Therefore, the evidence was insufficient to prove that plaintiff was entitled to rescission.