In the case of mutual rescission, what must both parties do?

In a situation of mutual rescission, both parties involved in a contract must agree to cancel the existing agreement, which forms the basis for the need for a new contract. Mutual rescission involves both parties consentingly terminating their obligations under the original contract, typically because they no longer want to pursue the terms agreed upon initially.

This process does not simply involve negotiating new terms or fulfilling existing obligations; rather, it requires the creation of a fresh agreement that nullifies the previous one. The act of mutual rescission itself is essentially an acceptance of the termination of the contract, requiring a formal understanding that both parties are in agreement.

The other options, such as fulfilling existing obligations or submitting claims for damages, do not apply here since the aim is to end the contractual relationship rather than continue or resolve disputes regarding it.