NEWS & INSIGHTS

Rescission or Termination After Reviewing a Sales Employee's Advance Payment of Part of the Deposit

1. Facts and Background

A paid only part of the cash available at the site. A sales employee transferred the remainder of the deposit on A's behalf, and A repaid that amount after returning home. A retained LK Partners LLC to assess the burdens of maintaining the contractual relationship and the legal and negotiated options for ending it.

2. Key Legal Issues

First, the issue was whether the circumstances in which the employee's payment induced formation could constitute a defect in the contracting process, such as fraud or mistake. Second, the significance of circumstances such as accompanying A to a bank to withdraw cash had to be evaluated. Third, it was necessary to identify the evidence capable of proving the advance payment.

3. Work Performed and Outcome

LK Partners LLC (i) secured messages requesting the advance payment, transfer records, and the remitter's name; (ii) organized the timeline from the visit through payment and the refund request; (iii) sent a content-certified notice identifying defects in the contracting process, including fraud or mistake, and demanding return of the deposit; and (iv) prepared the next response in case negotiations failed. The advance-payment circumstances were accepted as a defect in the contracting process, the agreement was rescinded or terminated, and A recovered the full deposit. This case demonstrates the need to review contract formation, contract language, performance, and evidence together. In practice, the existence of evidence proving the advance payment can determine the outcome. Records of the payment should therefore be preserved.