The evidence does not disclose that they were aware of the alleged fraud or of their right to rescind at the time. Little Missouri Minerals specifically directs our attention to the case of Fedorenko v. Rudman, 71 N.W.2d 332 (N.D. 1955), which quoted Bauer v. National Union Fire Ins. Co., 51 N.D. 1, 198 N.W. 546, 549, as follows: The right to rescind is waived by unexcused delay, although no prejudice or injury be shown as a result thereof.
Such a casting of state remedy into particular category would not necessarily be of importance in the diversity jurisdiction of the federal courts, except that North Dakota appears to accord to the effect of such a legal rescission a substantive significance on the party's remedial rights. Exercise of the statutory rescinding power in an applicable situation "abrogates and undoes the contract from the beginning", so that the transaction is thereby caused to be left without remaining form or substance. Fedorenko v. Rudman, N.D., 71 N.W.2d 332, 336. And it is not open to a party to escape that obliterating consequence, for "when he once elects, he must abide by his decision".
"The general rule in North Dakota is that the question whether the rescinding party acted with due promptness is one of law for the Court to decide. Fedorenko v. Rudman, N.D., 71 N.W.2d 332. The diligence or promptness required to rescind upon discovering the facts, under the North Dakota statutes, is the same whether the party attempting to rescind relies upon the grounds of mistake, duress, menace, fraud, or undue influence. Fedorenko v. Rudman, supra, at page 338.
The general rule in Norm Dakota is that the question whether the rescinding party acted with due promptness is one of law for the Court to decide. Fedorenko v. Rudman, N.D., 71 N.W.2d 332. The diligence or promptness required to rescind upon discovering the facts, under the North Dakota statutes, is the same whether the party attempting to rescind relies upon the ground of mistake, duress, menace, fraud, or undue influence.
Our case law demonstrates that a waiver of the right to rescind under § 9-09-04 can occur even when the action is commenced well within the running of the six-year statute of limitations. See Lindemann v. Lindemann, 336 N.W.2d 112 (N.D. 1983) [right to rescind waived when action brought approximately two and one-half years after plaintiffs became aware of right to rescind]; Fedorenko v. Rudman, 71 N.W.2d 332 (N.D. 1955) [right to rescind waived when action brought 16 months after plaintiffs became aware of right to rescind]. Thus, rescission is proper only if the party seeking rescission uses reasonable diligence to rescind promptly upon discovery of the facts which entitle the party to rescind, and if the party restores to the other party anything of value which was received under the contract. Holcomb v. Zinke, 365 N.W.2d 507, 510 (N.D. 1985).
The trial court in this case determined only when Schmidt's cause of action for rescission accrued for purposes of applying the six-year statute of limitations under § 28-01-16, N.D.C.C., but did not analyze whether Schmidt had satisfied the separate requirement of a prompt rescission under § 9-09-04, N.D.C.C. Our case law demonstrates that a waiver of the right to rescind under § 9-09-04 can occur even when the action is commenced well within the running of the six-year statute of limitations. See Lindemann v. Lindemann, 336 N.W.2d 112 (N.D. 1983) [right to rescind waived when action brought approximately two and one-half years after plaintiffs became aware of right to rescind]; Fedorenko v. Rudman, 71 N.W.2d 332 (N.D. 1955) [right to rescind waived when action brought 16 months after plaintiffs became aware of right to rescind]. Because we conclude that Schmidt's action is barred by the six-year statute of limitations, we need not address whether Schmidt waived the right to rescind under § 9-09-04.
In support of his proposition that violation of franchise statutes does not automatically allow rescission, Nielsen cites Martschinske v. Olympic Styles, Inc., 628 F. Supp. 231 (D.S.D. 1984) ( affirmed 774 F.2d 1172 (8th Cir. 1985); Northwest Realty Co. v. Carter, 338 N.W.2d 669 (S.D. 1983); Bagel Enterprises, Inc. v. Baskin Sears, 56 Md. App. 184, 467 A.2d 533 (1983); Kemp v. Weber, 180 Md. 362, 24 A.2d 779 (1942); Clapp v. Peterson, 327 N.W.2d 585 (Minn. 1982); and Fedorenko v. Rudman, 71 N.W.2d 332 (N.D. 1955). A comparative analysis of these cases persuades us that McCabe must comply with established rules of rescission and he is not automatically entitled to rescission upon violation of franchise filing statutes.
See generally Robertson Companies, Inc. v. Kenner, 311 N.W.2d 194 (N.D. 1981); 8A G. Thompson, Commentaries on the Modern Law of Real Property § 4465, at 365 (1963). This court has often stated that rescission of a contract, whether the object of a suit in equity or an action at law, is governed by equitable principles. E.g., Peck of Chehalis v. C.K. of Western America, 304 N.W.2d 91 (N.D. 1981); Dvorak v. Kuhn, 175 N.W.2d 697 (N.D. 1970); Volk v. Volk, 121 N.W.2d 701 (N.D. 1963); Fedorenko v. Rudman, 71 N.W.2d 332 (N.D. 1955). "The remedy of rescission of a contract is not one of absolute right but rests in the sound discretion of the court to be exercised in accordance with what is reasonable and just under the particular circumstances." 8A G. Thompson, supra; Hesselgrave v. Mott, 23 Wn.2d 270, 160 P.2d 521 (1945).
" The law is well settled that a party who fails to promptly exercise the right of rescission upon discovery of the facts necessary to rescind waives that right. Berg v. Hogan, 322 N.W.2d 448 (N.D. 1982); Fedorenko v. Rudman, 71 N.W.2d 332 (N.D. 1955). The determination of whether or not a party has waived the right to rescind an agreement by failure to act promptly is a question of law for the court to determine.
This court has previously recognized the semantic difference between the two words. See Fedorenko v. Rudman, 71 N.W.2d 332, 336 (N.D. 1955); Funk v. Baird, 72 N.D. 298, 306, 6 N.W.2d 569, 573-574 (1942). However, in the context of the present case, we note the following observations of Professor Williston in 12 Williston on Contracts § 1454A, at 9-10 (3d Ed. 1970):