After a contract has been made, it may be terminated. In some cases, after the termination, there will be no legal obligation between the parties, but in other cases, the parties must return to where they were at the time of entering into the contract, a process called rescission of a contract, which this article is going to give you a wide picture of.

Conditions of the Rescission of Contract

The parties to the contract may rescind the contract. If, by contract or by the provisions of law, such a party has the right of rescission, without one of those conditions, each party has no right to rescind the contract, according to Section 387 of the Civil and Commercial Code (CCC). If the contract doesn’t grant the parties the right of rescission, in which cases does the law allow the parties to rescind the contract?

  1. If one party does not perform the obligation after being given a reasonable period and notice to perform within that period, and he does not perform within that period, the other party may rescind the contract according to Section 387 of the CCC.
  2. If the object of a contract, either by nature or an intention declared by the parties, can be accomplished only by the performance of a fixed period of time, and such time has passed without the performance, the other party may rescind the contract without giving a notification (Section 388 of the CCC).
  3. If the performance of the contract becomes wholly or partly impossible due to a cause attributable to the debtor, the creditor may rescind the contract (Section 389 of the CCC).

Importantly, if the property that is the subject of a contract is damaged in the essential part by the act of the parties, such parties have made restitution impossible, or the difference in the property is such that such parties have no right to rescind (Section 394 of the CCC).

How to Rescind the Contract?

The rescission of the contract doesn’t need to be made in writing; it may be made by a declaration of intention to the other party (supreme court judgement no. 1129/2504, 4645/2540). Further, the declaration of intention in the foregoing paragraph cannot be revoked (Section 388 of the CCC).

The Results

If one party has exercised his right of rescission correctly under one of those clauses mentioned above, each party is bound to restore the other to his former condition.

In case the amount of money needs to be repaid, the interest shall be paid from the time it was received. For services or the use of a thing, restitution shall be made by paying compensation for the value.

However, the exercise of the right of rescission doesn’t only affect a claim for damages. But also not affect the rights of third parties (Section 391 of the CCC). It cannot be impaired.

In conclusion, if the contract doesn’t grant the parties the right of rescission, the contract may be rescinded under the conditions of the law. However, in some cases, there will be a specific law that allows the rescission, e.g., for hire of work contracts, as long as the work is not completed, the employer may terminate the contract by making compensation to the contractor for any damages resulting from the termination of the contract (Section 605 of the CCC).

To get our professional advice to know if the rescission can be applied to your case or what the different solutions are, visit our contract lawyers page or feel free to contact us.