Delaware Trial Handbook § 22:3. RESCISSORY DAMAGES

In an action for rescission, if, due to a change in circumstances, rescission has been rendered impossible or impracticable, the court in its discretion can award rescissory damages instead.23 The purpose of rescissory damages is to restore a plaintiff to the position occupied before the defendant’s wrongful acts.23.1 The proper measure of damages in such circumstance is the equivalent value of the property taken as of either the time such property was disposed of by the defendant or the time of the judgment.24

An award of rescissory damages is an exception to the normal out-of-pocket measure. Such an award is considered exceptional, because rescissory damages are measured as of a point in time after the transaction, whereas compensatory damages are determined at the time of the transaction. As a consequence, rescissory damages may be significantly higher than the conventional out-of-pocket damages, because rescissory damages could include post-transaction incremental value elements that would not be captured in an out-of-pocket recovery.24.1

It is a well-established principle of equity that a plaintiff waives the right to rescission by excessive delay in seeking it. In order to benefit from a party’s excessive delay in asserting rescissory damages, the delay must have both worked a disadvantage to the opposing party and must have been unreasonable under the circumstances.24.2

23. Oberly v. Kirby, 592 A.2d 445, 466 (Del. 1991); Harman v. Masoneilan International, Inc., 442 A.2d 487, 503 (Del. 1982); Lynch v. Vickers Energy Corp., 429 A.2d 497, 501 (Del. 1981), overruled in part on other grounds by Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983); Hutchinson v. Fish Engineering Corp., 153 A.2d 594, 596 (Del. Ch. 1959), app. dismissed, 162 A.2d 722 (Del. 1960); Russell v. Morris, C.A. No. 10009, slip op. at 14, Chandler, V.C.  (Del. Ch. Feb. 14, 1990), reh’g denied, C.A. No. 10009, Chandler, V.C. (Del. Ch. Apr. 2, 1990), app. denied mem., 577 A.2d 754 (Del. 1990).

23.1. Schultz v. Ginsburg, 965 A.2d 661, 669 (Del. 2009).

24. Lynch v. Vickers Energy Corp., 429 A.2d 497, 501 (Del. 1981), overruled in part on other grounds by Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983); Morris v. Thayer, C.A. No. 10393, slip op. at 7, Hartnett, V.C. (Del. Ch. Nov. 15, 1991).

24.1. Strassburger v. Earley, 752 A.2d 557, 579 (Del. Ch. 2000).

24.2. Ryan v. Tad’s Enterprises, Inc., 709 A.2d 682, 699 (Del. Ch. 1996); In re Fuqua Industries, Inc., C.A. No. 11974, slip op. at 18, Chandler, C. (Del. Ch. May 6, 2005).

© 2010  David L. Finger