Cancellation of an Instrument

The cancellation of an instrument must be based upon appropriate grounds, the gist of which makes the enforcement of the instrument inequitable. Such grounds must be proven by a PREPONDERANCE OF THE EVIDENCE presented in the civil action. A term of a document may provide for its cancellation, and courts will usually act accordingly when the facts warrant it. The setting aside of an instrument that appears to record the agreement of the parties to it is considered a significant intervention by a court, which will not be done for a trivial reason or merely because of a change of mind by one party. The primary grounds for cancellation involve the validity of the instrument itself and the agreement that it embodies.

Duress An instrument that was obtained by duress, the use of threats or physical harm to compel one party to enter an agreement that he or she would not have made otherwise, can be canceled at the request of the victimized party. If duress was present at the time the contract was entered, the agreement of the parties is a sham, as the victim was forced to act against his or her will. It would be inequitable for a court to enforce such an agreement.

Fraud An instrument may be set aside if it was induced by fraud—an intentional deception of another—to gain an advantage over him or her. To justify cancellation, it must be clearly established that the representations made to the victim were untrue and of such a material nature that without them the victim would not have agreed to the transaction. In addition, it must be shown that such statements were made intentionally to defraud the victim and that the statements were relied upon by him or her in the decision to enter the agreement. Fraud vitiates an agreement, which makes it unjust to enforce a document embodying its terms.

If, however, a material MISREPRESENTATION is made innocently by one party, the victim is still entitled to have the instrument set aside, as it does not reflect the mutual assent of the parties.

Mental Incapacity If an agreement has been made by one party who, at the time of its execution, was mentally incapable of understanding the nature of the transaction, it may be canceled at the request of the victim or the victim's legal representative. This is particularly true when the other party has taken advantage of the victim's incompetence in drawing the terms of the agreement.

Courts frequently cancel an instrument entered by a person so intoxicated at the time of executing the document that he or she does not comprehend its legal ramifications. Cancellation is justified particularly when the intoxication is brought about by the other party in order to deceive the victim about the nature of their agreement.

Mistake When the parties have both made a mutual MISTAKE OF FACT concerning the agreement entered, an instrument may be canceled, since there is no real agreement between them. If a unilateral mistake exists, that is, a mistake by one party, a court may set aside the document and restore the parties to their position prior to its execution. In order to justify cancellation, a mistake must be material and involve a significant part of the agreement without which the contract would not have been entered into. If the mistake is the result of the carelessness of one or both parties, a court may deny a request for cancellation.

Undue Influence UNDUE INFLUENCE, which is the unfair use of pressure on the will of another to gain an advantage over him or her, is a ground for the cancellation of an instrument because one party's will is so overcome by pressure that the person is effectively deprived of freedom of choice. Undue influence is usually established when there is a confidential relationship between the parties and one of them has a greater bargaining power or influence on the other.

Forgery or Alteration The cancellation of an instrument is justified when it has been forged. Moreover, if an instrument has been materially altered without the consent or knowledge of the party against whom the change is effective, the instrument may be set aside.