Kuwait Court of Cassation principle number 358

Summary: - Rescission or automatic dissolution of a contract. The general rule is to restore the contracting parties to the position they were in when it was concluded. Articles 211 and 216, Civil Code. Continuing contracts are excepted. The reason: dissolution of the contractual relationship in such contracts is confined to the future, not the past, and from the date on which it occurs. The reason and basis: in such contracts, time is significant in determining the extent of performance of the obligations arising from them. An example concerning a restaurant investment contract. - An investment contract. A continuing contract whose rescission has no retroactive effect. Rule: It is established—in the jurisprudence of this Court—that, although the general rule is that rescission or automatic dissolution of a contract restores the contracting parties to the position they were in when it was concluded, pursuant to Articles 211 and 216 of the Civil Code, an exception is made by Article 212, which provides that “In continuing contracts, rescission shall have effect only from the time it occurs.” This Article—as explained in the explanatory memorandum—establishes a rule for continuing contracts different from that for instantaneous contracts, confining the effect of dissolution of the relationship to the future, not the past, and from the date on which it occurs, because time is significant in this type of contract in determining the extent of performance of the obligations arising from them. That being so, and whereas the challenged judgment upheld the first-instance judgment rescinding the investment contract in dispute and obliging the appellant company to pay the respondent what resulted from rescission from the time it occurred, consisting of the investment consideration it had failed to pay, the amount of the instalments for the 2 vehicles that are the subject of the contract, labour entitlements, and the consideration for goods purchased for the restaurant which it was obliged to pay; and whereas the investment contract in dispute is a continuing contract whose rescission has no retroactive effect, what the appellants raise in this criticism is unfounded.