Oregon 30-Hour Real Estate Law Practice Test

A mutual agreement to cancel a contract is known as what?

1. Termination

2. Rescission

3. Abandonment

4. Implied consent

The correct answer is: Rescission

A mutual agreement to cancel a contract is referred to as rescission. This legal term indicates that both parties consent to nullify a previously binding agreement, essentially undoing the contract as if it never existed. Rescission can occur for a variety of reasons, including mutual mistake, misrepresentation, or simply because both parties agree that it is in their best interest to terminate the agreement. Other terms related to the ending of contracts have distinct meanings. For instance, termination typically refers to ending a contract unilaterally or because of a breach, rather than a mutual decision. Abandonment implies one party's intention to withdraw from the contract without a formal process, which does not involve mutual agreement. Implied consent suggests an assumption that consent exists based on actions rather than explicit agreement, which does not directly align with the concept of mutual cancellation. Therefore, rescission is the appropriate term for this situation, highlighting the shared decision of both parties to end the contract.