Rescission of Contract

Rescission of Contract.

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

Conditions of the Rescission of Contract.

The parties of the contract may rescind the contract If by contract or by the provisions of law such party has the right of rescission, without one of those conditions each parties has no right to rescind the contract according to the Section 387 of Civil and Commercial Code (CCC). If the contract doesn’t grant the parties the rights of rescission of contract, 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 the Section 387 of the CCC.
  2. If the object of a contract either the nature or an intention declared by the parties, can be accomplished only by performance at a fixed period of time, and such time has passed without having the performance, the other party may rescind the contract without giving a notification (Section 388 of the CCC).
  3. If performance of the contract becomes wholly or partly impossible by a cause attributable to the debtor, the creditor may rescind the contract (Section 389 of the CCC).

Importantly, If the property which is the subject of a contract is damaged in the essential part by the act of the parties, or such parties have created the restitution impossible or the difference of the property such parties has no right to rescind (Section 394 of 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 judgment no. 1129/2504, 4645/2540). Further, the declaration of intention in the foregoing paragraph cannot be revoked (Section 388 of the CCC).

The Result

If one party has exercised his right of rescission correctly to 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 when it was received. For services or the use of a thing, the restitution shall be made by paying the compensation of the value.

However exercise of the right of rescission doesn’t only not affect a claim for damages. But also, not affect the rights of third persons (Section 391 of 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 condition of the law. However, in some case there will be the Specific Law which allow the rescission e.g. Hire of Work Contracts as long as the work is not completed, the employer may terminate the contract on making compensation to the contractor for any damages resulting from the termination of the contract (Section 605 of CCC).

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

Article by;
Akenarin Thongplod Thai Barrister At Law
and Frederic Retif Master in Business law, French Lawyer and Thai Legal Advisor.