What is the exam-ready distinction?
| Official syllabus topic | Contracts: Ending, Unwinding, and Discharging Agreements |
|---|---|
| Official PSI area | Contracts |
| Published weight | 19% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Rescission | Cancellation | Termination |
|---|---|---|---|
| Usual purpose | Unwinds the agreement and seeks restoration | Ends an agreement under a right or mutual agreement | Stops future performance under the contract |
| Past performance | Parties may need to restore benefits received | Depends on the contract and grounds | Accrued rights and liabilities can survive |
| Timing clue | Treat the bargain as undone | Exercise a cancellation right or agree to cancel | End duties from the effective termination date |
| Caution | An equitable or contractual remedy, not an automatic label | The word is used inconsistently in forms | Does not necessarily erase prior breach |
Decision rule
Georgia-specific distinction
Worked example
Scenario. After discovering qualifying fraud, a buyer asks the court to set the agreement aside and return the buyer's deposit while returning anything received from the seller.
Reason it through. The requested relief seeks to undo the transaction and restore both sides, not simply stop future duties.
Answer. The remedy described is rescission.
Common exam traps
- Treating the three words as universal synonyms
- Assuming termination erases accrued liability
- Calling any refund rescission
- Ignoring notice, tender, and restoration requirements
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1After discovering fraud, a buyer asks a court to set aside a purchase agreement, return the buyer's deposit, and have the buyer return what the seller provided. What remedy is the buyer seeking?
- A. Termination
- B. Rescission
- C. Novation
- D. Specific performance
Show answer and explanation →
Answer: B. Rescission
Rescission unwinds the contract and restores both parties as nearly as possible to where they started. Returning the deposit and what the seller provided is that restoration. Termination is the wrong choice, but it only ends future duties and does not undo what already happened.
Question 2A property management agreement ends by notice on June 30. The owner has not yet paid the manager's fees earned in May. What is the effect of ending the agreement?
- A. Both parties must return everything received so far
- B. All duties end, including the unpaid May fees
- C. Future duties end, but the May fees are still owed
- D. The agreement is treated as if it never existed
Show answer and explanation →
Answer: C. Future duties end, but the May fees are still owed
Termination stops performance from the effective date forward while accrued rights and liabilities survive. The May fees were earned before June 30, so the owner still owes them. The plausible error is assuming termination wipes out every obligation, including debts already earned.
Question 3A form labels a clause "cancellation," but the clause requires each party to return what it received and restores both to their positions before the contract. How should this clause be analyzed?
- A. By its heading, as a cancellation ending future duties only
- B. As a termination, since every contract remedy is prospective
- C. As liquidated damages, since money changes hands at the end
- D. By its stated effect, which is a rescission-type unwinding
Show answer and explanation →
Answer: D. By its stated effect, which is a rescission-type unwinding
Forms use rescission, cancellation, and termination inconsistently, so the stated effect of the clause decides the classification. Requiring restoration of both parties is the mark of rescission. Relying on the heading is the plausible shortcut, but labels do not change what the clause does.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Liquidated Damages Versus Specific Performance. Next, liquidated damages versus specific performance covers what a party can seek after breach, an agreed money amount or a court order to convey, instead of unwinding the contract through rescission.
Return to the complete exam-concept library or the Contracts hub.