Ferguson v. Yaspan – Statute of Limitations Not Applicable to Defense Based on Rescission

In a lawsuit based on a contract, one party can seek relief based on the theory of rescission.  Rescission can be considered an equitable judicial remedy.  Under California Civil Code section 1689, rescission supports “extinction” of the obligation.

Rescission can be pled as a basis for affirmative relief, or it can asserted as defense to a claim based on contract.  Which is what happened in Ferguson v. Yaspan (2015) 233 Cal.App.4th 676 – the defendant asserted rescission as a defense to a contract lawsuit.

The dispute in Ferguson v. Yaspan arose between an attorney (defendant) and his former client (plaintiff).  In 1995, the plaintiff sold defendant an interest in a London flat owned by plaintiff.  Later, the Fergusons sought to set aside the written agreement.

rescission

Here’s the interesting part of the decision.  The court opined on rescission as a defense, holding that such a defense was not subject to the statute of limitations.  Explained the court

“The invalidity of a contract may be asserted either as a basis for affirmative relief or as a defense.  When a litigant seeks affirmative relief, her claim may be barred if filed outside the statute of limitations period.

“However, where invalidity is raised solely as a defense, there is no limitations period because statutes of limitations are designed to ‘act as a bar to actions or proceedings’ –  not to individual claims or defenses.”

Thus, a defense based on a claim of rescission is not subject to being struck as pled outside the statute of limitations.

Randy Krbechek posted at 2016-4-15 Category: Case law, Developments

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