Kuwait Court of Cassation principle number 79

Summary: - Rescission or automatic dissolution of a contract. The general rule is restoration of the contracting parties to their position when it was concluded. Articles 211 and 216 of the Civil Code. Exception for continuing contracts. Reason: dissolution of the contractual relationship is confined to the future, not the past, and takes effect from the date it occurs. Reason and basis: time in such contracts is significant in determining the extent of performance of the obligations arising from them. Example concerning a restaurant investment contract. - An investment contract. A continuing contract whose rescission has no retroactive effect. Rule: It is established in this Court’s case law that, although the general rule is that rescission or automatic dissolution of a contract restores the contracting parties to their position when it was concluded, pursuant to Articles 211 and 216 of the Civil Code, an exception is provided by Article 212, which states: "In continuing contracts, rescission has effect only from the time it occurs." As explained in the explanatory memorandum, this article establishes a rule for continuing contracts different from that for instantaneous contracts, limiting the effect of dissolution of the relationship to the future rather than the past, from the date it occurs, because time in this type of contract is significant in determining the extent of performance of the obligations arising from them. That being so, the challenged judgment upheld the first-instance judgment rescinding the investment contract in dispute and requiring the appellant company to pay the respondent the amounts resulting from rescission from the time it occurred, comprising the investment consideration it had failed to pay, the value of the installments for the two cars covered by the contract, workers’ entitlements, and the consideration for goods purchased for the restaurant which it was obliged to pay. Since the investment contract in dispute is a continuing contract whose rescission has no retroactive effect, the appellants’ contention in this ground of challenge is unfounded.