Rescission ends a contract because the other party has failed to perform. Unlike annulment, it does not treat the contract as never having existed: it releases both parties from their obligations for the future and creates obligations to undo what has already been performed.
Legal basis
Article 6:265 of the Dutch Civil Code provides that any failure to perform gives the other party the right to rescind, unless the failure, given its particular nature or minor significance, does not justify rescission with its consequences. That exception clause carries most of the weight in practice: it is for the defaulting party to invoke and substantiate it.
Where performance is not yet permanently impossible, rescission requires that the debtor be in default. Article 6:267 allows rescission by a written declaration to the other party; a court decision is possible but not necessary.
The consequences
Article 6:271 turns performances already rendered into obligations to return. Where returning is not possible, as with a service that has been performed, its value is compensated instead. Rescission and damages can be combined, so a party that rescinds may still claim the loss caused by the breach.
Partial rescission
Article 6:265 also permits rescission of part of the contract. Where a delivery of ten machines includes two that are defective, rescinding for those two while keeping the rest is often the proportionate route, and a court will more readily accept it than full rescission.
Where it goes wrong
The declaration is frequently sent too early, before default has arisen, which makes it ineffective and puts the sender in breach. The other recurring problem is proportionality: rescinding an entire long-term agreement over a single late delivery invites the exception in Article 6:265, and a court that applies it leaves the rescinding party exposed.
Related terms
See also breach of contract, default and notice of default.
Our civil law team advises before a contract is terminated, which is usually where the case is won.
