Offering construction machinery to the construction industry sometimes brings with it tangled affairs with clients. Disputes sometimes arise between merchants and buyers in the construction machinery industry, creating a potential for litigation and counter litigation. When a buyer contends that a merchant has delivered defective construction machinery, and the merchant contends that the buyer has breached a payment term, oftentimes, each party is compelled to devote significant resources to the dispute. The parties to a commercial transaction in the construction machinery industry would sometimes prefer to terminate one agreement and to replace it with a new one to carry out some of the original purchaser’s business. However, to do so would sometimes require an exhaustive process to determine how to allocate risk among the various parties.
One of the more efficient ways that a company in the construction machinery sector can avoid protracted litigation is by incorporating a mutual rescission and release agreement into its agreements with customers and suppliers. Such an agreement can help my client, Vinay Industries, in its dealings with a supplier, a machine manufacturer. A “mutual rescission and release agreement” is a contract that both sides sign, agreeing to “rescind” or “undo” an existing agreement (like a sales contract), and to release and not pursue any claims against each other. Signed in advance of the events leading up to a potential dispute, such a contract can mitigate losses by avoiding a dispute entirely. Such contracts also avoid what the parties presume can be contract disputes by agreeing to end one agreement, but to create a new one to continue business.
In Vinay Industries’ example, rather than fight a counter-claim for breach of agreement with a customer, Vinay and the customer could have agreed to a “mutual rescission and release agreement,” which would agree to the following terms:
The mutual rescission and release agreement is useful in cases where the parties simply wish to continue with a new contract, but simply wish to subject the old contract to a termination clause. In the example, Vinay Industries may have shipped to a customer construction machinery that was defective in its operation. Vinay may have signed an agreement for payment on a 60-day period, and the customer may have withheld payments after 6 days have passed. In this example, Vinay Industries and the customer may desire to move on, without calling in lawyers. Selectable provisions in a “mutual rescission and release agreement” may provide Vinay and the customer a variety of options for limiting their potential liabilities and identifying working procedures moving forward.
Cost-cutting and spending reduction are important priorities in the manufacturing business, and they are even more so in the construction machinery sector. Using “mutual rescission and release agreements” retains managers’ focus on the task at hand, rather than engaging an expensive and time-consuming dispute resolution process. While those in construction machinery manufacturing seek to improve their efficiencies and reduce costs, they can do so by using mutual rescission and release agreements to identify potential areas of litigation.
For more information on contract law and agreements, you can visit Wikipedia.