In re Schick

Issue Discussed: Rescission and Reformation

Submitted by Michele Jacobson, Michael Fernandez

Date Promulgated: April 26, 1999

In re Schick, 232 B.R. 589 (Bankr.S.D.N.Y.1999)

Court: United States Bankruptcy Court for the Southern District of New York

Issue Decided: Whether a party may obtain rescission following an extended delay in commencing an action?

Key Holdings
Claimants alleged that they were fraudulently induced into entering into a stipulation of settlement. Nonetheless, the court held that the Claimants had failed to seek rescission promptly upon learning of the fraud and declined to grant rescission based on a nearly two year delay in seeking rescission. The court observed that the requirement of promptness was not an affirmative defense to a claim for rescission, but rather an element of the prima facie claim of rescission.

Key Takeaways
A party seeking rescission must act promptly, and must prove, as part of the claim for rescission that s/he acted promptly . The failure to promptly seek rescission will result in a failure of the claim.