Section 27 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 27 allows any person interested in a contract to sue to have it rescinded, and lists two cases in which the court may adjudge rescission: a contract voidable or terminable by the plaintiff, and a contract unlawful for causes not apparent on its face where the defendant is more to blame. Sub-section (2) lists four grounds on which the court may refuse. An Explanation covers territories to which the Transfer of Property Act does not extend.
This article follows the consolidated text of the Act consulted (amendments shown up to Act 18 of 2018). Later amendments should be checked before you rely on any provision.
Any person interested in a contract may sue to have it rescinded. The court may adjudge rescission where the contract is voidable or terminable by the plaintiff, or unlawful for causes not apparent on its face and the defendant is more to blame. It may refuse where the plaintiff ratified the contract, where change of circumstances prevents restoring the parties (not due to the defendant), where third parties acquired rights in good faith, without notice and for value, or where only a part is sought to be rescinded and it is not severable.
Section 27(1): who may sue and the two cases
"Any person interested in a contract may sue to have it rescinded, and such rescission may be adjudged by the court in any of the following cases, namely".
"Any person interested in a contract" is wider than the parties alone, though the Act does not define "interested". Rescission "may be adjudged": the court has a power, not a duty.
Clause (a): "where the contract is voidable or terminable by the plaintiff". A voidable contract is one that the party concerned can choose to avoid, for example where consent was not valid. For the Contract Act's explanation, see our posts on voidable agreements where consent is not valid and on void and voidable contracts. "Terminable" refers to a contract the plaintiff has a right to terminate.
Clause (b): "where the contract is unlawful for causes not apparent on its face and the defendant is more to blame than the plaintiff". Both parts must be satisfied: the unlawfulness is not apparent on the face of the contract, and the defendant is more to blame than the plaintiff.
An invented example: Kiran Agro buys machinery under an agreement in which the seller concealed a fact that makes the sale unlawful. The unlawfulness is not apparent on the face of the agreement, and the seller is more to blame. Kiran Agro may sue to have the contract rescinded under clause (b).
If you think a contract you signed is voidable or you want out of a deal, our team can review the agreement and your options before you act or make any further payment.
Section 27(2): grounds on which the court may refuse
"Notwithstanding anything contained in sub-section (1), the court may refuse to rescind the contract—"
- (a) "where the plaintiff has expressly or impliedly ratified the contract". A plaintiff who accepted the contract, by words or conduct, may be refused rescission.
- (b) "where, owing to the change of circumstances which has taken place since the making of the contract (not being due to any act of the defendant himself), the parties cannot be substantially restored to the position in which they stood when the contract was made". Restoration of the parties is the idea. If circumstances have changed so that the parties cannot be substantially restored, and the change is not due to the defendant's own act, the court may refuse.
- (c) "where third parties have, during the subsistence of the contract, acquired rights in good faith without notice and for value". Three elements together: good faith, without notice, for value.
- (d) "where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract". A part cannot be rescinded if it cannot be separated from the rest.
The wording is "may refuse", so these are grounds on which the court has a discretion, not automatic bars.
The Explanation
"In this section 'contract' in relation to the territories to which the Transfer of Property Act, 1882 (4 of 1882), does not extend, means a contract in writing." So in territories where the Transfer of Property Act, 1882 does not extend, only a written contract counts. Which territories those are is not stated in the text consulted. For the Transfer of Property Act itself, see our introduction to the Transfer of Property Act, 1882.
| Provision | Rule | Key words |
|---|---|---|
| 27(1)(a) | Rescission may be adjudged | Contract voidable or terminable by the plaintiff |
| 27(1)(b) | Rescission may be adjudged | Unlawful for causes not apparent on its face; defendant more to blame |
| 27(2)(a) | Court may refuse | Plaintiff expressly or impliedly ratified |
| 27(2)(b) | Court may refuse | Change of circumstances; parties cannot be substantially restored; not due to defendant |
| 27(2)(c) | Court may refuse | Third parties acquired rights in good faith, without notice, for value |
| 27(2)(d) | Court may refuse | Only part sought; not severable |
| Explanation | Meaning of "contract" | Contract in writing in territories where the Transfer of Property Act, 1882 does not extend |
How rescission fits with related sections
Rescission is a different remedy from cancellation of an instrument (covered from section 31) and from rectification of an instrument (section 26). Where rescission is adjudged, section 30 may require the party who gets the relief to restore the benefit received and make compensation as justice requires; see sections 29-30. A plaintiff may also pray for rescission as an alternative in a suit for specific performance. After a decree for sale or lease of immovable property, there is a special rescission route in section 28. For the Contract Act's rules on rescission and on the compensation due to a party who rightfully rescinds, see our posts on remission, rescission and restitution under the Indian Contract Act, 1872 and on compensation to a party rightfully rescinding a contract.
Practical points
Act promptly once you discover the ground; conduct that looks like acceptance may be treated as ratification. Do not deal with the other side's property or performance as though the contract stands. Keep evidence that third parties have or have not acquired rights, since good faith, absence of notice and value are the test. If you want to rescind only one term, check whether it is severable. The Act prints no period for a rescission suit; for the time to sue see the Limitation Act article on cancellation of instruments, setting aside decrees and rescission of contract.
Need help deciding whether to rescind?
The decision turns on how the contract came about, what you have done since and who else has acquired rights. You can ask us to review the contract and the facts before taking a step that might amount to ratification.
Key takeaways
- Any person interested in a contract may sue to have it rescinded.
- Rescission may be adjudged for a contract voidable or terminable by the plaintiff, or unlawful for causes not apparent on its face where the defendant is more to blame.
- The court may refuse where there is ratification, change of circumstances that prevents restoration, third-party rights acquired in good faith without notice and for value, or a non-severable part.
- In territories where the Transfer of Property Act, 1882 does not extend, "contract" means a contract in writing.
Read next
- Section 28 of the Specific Relief Act, 1963: rescission after a decree for sale or lease of immovable property
- Sections 29-30 of the Specific Relief Act, 1963: alternative prayer for rescission and doing equity
- Section 26 of the Specific Relief Act, 1963: rectification of instruments
Disclaimer: Based on a consolidated text of the Specific Relief Act, 1963 showing amendments up to the Specific Relief (Amendment) Act, 2018 (in force from 1 October 2018), as consulted on 2 October 2026. Later amendments, notifications under the Act and the law of limitation should be checked. This article is general information, not legal advice; check the official text before acting.