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California
Law Dictionary
Contracts-Third Party Beneficiary Standing
(Schauer v. Mandarin Gems of Cal., Inc. )

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Contracts-Rescission Civil Code section 1689
(Schauer v. Mandarin Gems of Cal., Inc. )

Rescission

Plaintiff has attempted to plead a separate cause of action for rescission. She is not entitled to that remedy. Civil Code section 1559 provides, “A contract, made expressly for the benefit of a third person, may be enforced by him [or her] at any time before the parties thereto rescind it.” (Italics added.) But only the parties to the contract may rescind it. Civil Code section 1689 provides, in pertinent part, “(a) A contract may be rescinded if all the parties thereto consent. [¶] (b) A party to a contract may rescind the contract in the following cases: [¶] (1) If the consent of the party rescinding, or of any party jointly contracting with him [or her], was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he [or she] rescinds, or of any other party to the contract jointly interested with such party. [¶] (2) If the consideration for the obligation of the rescinding party fails, in whole or in part, through the fault of the party as to whom he [or she] rescinds.” (Italics added.)

We have found no cases specifically holding the rescission remedy unavailable to a third party beneficiary, but the proposition is self-evident to a degree that might well explain the absence of precedent. Civil Code section 1559 grants a third party beneficiary the right to enforce the contract, not rescind it, and Civil Code section 1689 limits its grant of rescission rights to the contracting parties. Not only do the relevant statutes demand making rescission unavailable to a third party beneficiary, but common sense compels the conclusion. The interest of the third party beneficiary is as the intended recipient of the benefits of the contract, and a direct right to those benefits, i.e., specific performance, or damages in lieu thereof, will protect the beneficiary’s interests. Rescission, on the other hand, extinguishes a contract between the parties. (Civ. Code, § 1688.) Plaintiff, not having participated in the agreement, not having undertaken any duty or given any consideration, is a stranger to the agreement, with no legitimate interest in voiding it. As a matter of law, without an assignment of Erstad’s contract rights, plaintiff cannot rescind the sales contract to which she was not a party.

Schauer v. Mandarin Gems of Cal., Inc. G0332541/12/05 CA4/3

Jan 12 2005

G033254
[PDF] [DOC]

Schauer v. Mandarin Gems of Cal., Inc. 1/12/05 CA4/3

Filed 1/12/05

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Bruton v. United States, supra, 391 U.S. 123 [20 L.Ed.2d 476]
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