Rescission

Definition

Rescission cancels a contract and aims to restore the parties to the position they were in before it was made, reversing performances where possible. Under Dutch law it maps onto two distinct concepts: vernietiging, where consent was defective (for example fraud, error, or duress), and ontbinding, the unwinding remedy for serious breach under article 6:265. Both differ from ordinary termination, which only operates for the future.

Example

A buyer who was misled about a machine's capacity may seek to annul (vernietigen) the sale on the ground of error.

Why this is a business risk

Rescission is a powerful but time-limited remedy. Companies that miss the window to invoke it, or that fail to preserve their right by continuing to perform after discovering the defect, may find themselves unable to unwind a bad deal. The retroactive effect also creates complex obligations to restore what has already been exchanged.

How to manage it

• Act promptly on discovering a ground for rescission: delay can be construed as ratification of the defective contract.
• Preserve evidence of the defect (misrepresentation, duress, error) and of when you discovered it.
• Take legal advice before invoking rescission: a wrongful attempt to unwind a contract can itself constitute a breach.
• Consider whether you actually want unwinding: if the contract has been partly performed, dissolution may be more disruptive than claiming damages.

Legal references

• BW 6:265 Dutch Civil Code: dissolution for breach Dutch law
• BW 6:228 Dutch Civil Code: annulment for error Dutch law

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.