# Rescission

Source: https://contracko.com/glossary/rescission

# Rescission

Unwinding a contract so the parties are restored to their pre-contract position.

## 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.

### How Contracko helps

Contracko's contract repository and version history provide a dated record of what was agreed and how the relationship evolved, which is directly relevant when you need to show when a defect was discoverable or what representations preceded signing.

## Legal references

- [BW 6:265 Dutch Civil Code: dissolution for breach Dutch law](https://wetten.overheid.nl/BWBR0005289)
- [BW 6:228 Dutch Civil Code: annulment for error Dutch law](https://wetten.overheid.nl/BWBR0005289)

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.

## Relevant for

[Legal Services](https://contracko.com/industries/legal-services)[Commercial Real Estate](https://contracko.com/industries/commercial-real-estate)[Manufacturing](https://contracko.com/industries/manufacturing)

## Related clauses

- [Termination for Cause Clause](https://contracko.com/clause-library/termination-for-cause)
- [Warranties Clause](https://contracko.com/clause-library/warranties)
- [Entire Agreement Clause](https://contracko.com/clause-library/entire-agreement)

## Related terms

- [Termination](https://contracko.com/glossary/termination)
- [Breach of contract](https://contracko.com/glossary/breach-of-contract)
- [Representation](https://contracko.com/glossary/representation)
- [Good faith](https://contracko.com/glossary/good-faith)

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## Frequently asked questions

Common questions about this term.

- **Q:** Is rescission the same as ontbinding in Dutch law?
  **A:** Not exactly. The English idea of rescission splits into vernietiging (for defective consent) and ontbinding (for serious breach); the right one depends on the cause.

- **Q:** What is the difference between vernietiging and ontbinding?
  **A:** Vernietiging is for defective consent (error, fraud, duress) and treats the contract as if it never existed. Ontbinding is for serious breach and undoes future obligations, with restitution of what was already exchanged.

- **Q:** Is there a time limit for invoking rescission?
  **A:** Yes. Under Dutch law the right to annul for error or fraud expires three years after the defect was discovered (BW 3:52). Dissolution for breach requires that the debtor first be in default unless performance is permanently impossible.

- **Q:** What happens to payments already made when a contract is rescinded?
  **A:** Both parties must restore what they received. Payments already made are recoverable, and services rendered create an obligation to pay for the value received (ongedaanmakingsverbintenis).

- **Q:** Can an entire-agreement clause prevent a rescission claim?
  **A:** It limits but does not eliminate the risk. Under Dutch law an entire-agreement clause may reduce reliance on pre-contractual statements, but a blatant misrepresentation or fraud can still support a claim for vernietiging.

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