Contract Rescission

Contract rescission refers to the legal act of extinguishing the contractual relationship during the performance of a foreign trade contract due to reasons such as breach by one party, force majeure, or mutual agreement. Its use scenarios include: fundamental breach by the seller (e.g., refusal to deliver goods), unreasonable refusal to pay by the buyer, loss of goods due to force majeure, or mutual agreement to terminate the contract. Points to note: The exercise of the right of rescission must comply with the contract terms or legal provisions such as the United Nations Convention on Contracts for the International Sale of Goods (CISG). A written notice of rescission is usually required, and after rescission, both parties should return the goods or payments already received, and damages may be involved. Unlike 'termination,' rescission has retroactive effect, rendering the contract void ab initio; termination only extinguishes the contract's effect for the future. In the CISG, it is often used interchangeably with 'avoidance,' but avoidance emphasizes declaring the contract void due to fundamental breach. Foreign trade practitioners should clarify the conditions for rescission, the method of notice, and the legal consequences to avoid bearing liability for breach due to improper rescission.