Challenges and Recommendations for Iranian Law

ü  Lack of comprehensive and unified statutory provisions for rescission effects.

ü  Ambiguity in restitution and damage obligations [21].

ü  Recommendations:

·         Codify comprehensive rules on rescission, including anticipatory termination.

·         Integrate structured restitution and damages rules.

·         Harmonize domestic law with international standards (CISG) for cross-border commerce.

Discussion 

Contract rescission is a crucial mechanism in contract law that serves to balance the interests of parties when performance becomes impractical, illegal, or inequitable. In the context of Iranian civil law, rescission (faskh) is governed by provisions embedded in the Civil Code, primarily influenced by Islamic jurisprudence (fiqh). Iranian law recognizes various forms of rescission, including those arising from specific khiyar rights (e.g., khiyar al- ‘ayb for defective goods, khiyar al-ghubn for inequitable price) and mutual consent (iqal). While these provisions provide flexibility, they also create a fragmented legal framework that often relies heavily on judicial interpretation, resulting in unpredictability regarding restitution, compensation, and the timing of contract termination [22].

Empirical analyses of Iranian case law (Khosravi & Rezaei,2023; Sharifi,2022) reveal significant inconsistencies in the application of rescission. Courts may interpret identical legal provisions differently, especially concerning restitution the process by which parties return benefits received under the contract. For instance, in cases involving khiyar al- ‘ayb, some courts order full restitution, while others may allow partial retention under equitable principles. This inconsistency can undermine the predictability of legal outcomes and reduce confidence in contractual enforcement. Moreover, anticipatory or preemptive termination a well-established concept in international commercial law is not explicitly codified in Iranian law, which limits parties’ ability to mitigate damages or terminate contracts before significant breach occurs.

Comparative law perspectives, particularly from civil law jurisdictions and international conventions, offer valuable insights for evaluating these challenges. In civil law countries such as France and Germany, contract rescission is generally allowed in cases of non-performance, mistake, fraud, or significant changes in circumstances (hardship). Legal provisions in these systems are codified, providing clear guidance on both termination procedures and remedies, including restitution and compensation. For example, French civil code articles and German Bürgerliches Gesetzbuch (BGB) ensure that rescission entails return of received benefits and the possibility of damages for consequential losses. This structured approach increases predictability and minimizes reliance on discretionary judicial interpretation [23].

International frameworks, particularly the United Nations convention on contracts for the International Sale of Goods (CISG, 1980), further demonstrate the benefits of codification. CISG Article 72 establishes the right to terminate a contract upon a fundamental breach, requiring notice and providing remedies such as restitution and damages. This framework not only clarifies the conditions under which termination is valid but also balances the parties’ interests by providing a structured path for compensation. The CISG model exemplifies an approach that enhances commercial certainty and is particularly suited to cross-border trade, where predictability and uniformity are paramount [24].

A comparative analysis highlights several notable differences between Iranian civil law and these international frameworks. First, the codification of termination rights in civil law and CISG contrasts sharply with Iran’s reliance on jurisprudence and the fragmented khiyar system. While Iranian law offers multiple mechanisms for rescission, the lack of unified procedural and substantive rules complicates enforcement. Second, the absence of explicit anticipatory termination rights in Iran restricts parties’ ability to manage risk efficiently, whereas CISG and civil law systems provide mechanisms to terminate contracts proactively when fundamental breach or non-performance becomes evident. Third, the approach to restitution differs: Iranian courts may inconsistently apply restitution principles, whereas civil law and CISG frameworks ensure systematic return of benefits, creating a more equitable balance between parties [25].

Despite these differences, Iranian law does exhibit strengths that can inform broader comparative discussions. The flexibility of khiyar rights allows for nuanced solutions tailored to the circumstances of specific disputes. For instance, khiyar al-ghubn empowers parties to address cases where the contractual price is significantly inequitable, reflecting a sensitivity to fairness that is less emphasized in rigid statutory systems. Additionally, the possibility of mutual consent termination (iqal) aligns with international norms favoring autonomy and voluntary settlement. These features demonstrate that Iranian law possesses adaptable tools, but their efficacy is often undermined by inconsistent application and lack of codified procedures.

The analysis also reveals several practical implications for legal reform in Iran. First, codifying anticipatory or preemptive termination rights would allow parties to terminate contracts before irreparable damage occurs, aligning domestic practice with international norms. Second, establishing a unified statutory framework for restitution and compensation would reduce judicial discretion and increase predictability, fostering greater confidence in contractual enforcement. Third, harmonizing domestic rules with international conventions, particularly CISG, could facilitate cross-border trade and improve Iran’s integration into global commercial networks. By learning from comparative law, Iran could retain the fairness-oriented elements of its khiyar system while achieving greater clarity and predictability in contractual remedies.

Another critical point involves the treatment of damages and compensation. While Iranian law allows for compensation in theory, the lack of a consistent framework for measuring losses often results in unpredictability. Comparative systems, particularly CISG, combine rescission with clearly defined compensatory remedies, providing parties with an expected outcome in financial terms. Adopting similar principles in Iran could reduce litigation costs and encourage settlement, ultimately supporting economic efficiency [26].

From a theoretical perspective, this discussion underscores the value of a comparative approach in legal scholarship. By examining Iranian civil law alongside civil law jurisdictions and international frameworks, scholars and policymakers can identify gaps and propose targeted reforms. Comparative analysis not only highlights differences but also reveals potential synergies, demonstrating how Iran’s unique legal tradition can be harmonized with modern contractual practices without sacrificing its jurisprudential foundations [27].

In conclusion, the analytical review demonstrates that while Iranian civil law provides multiple avenues for contract rescission, its fragmented framework, reliance on judicial interpretation, and absence of anticipatory termination rights limit its effectiveness. Comparative law and international conventions provide structured remedies, predictable outcomes, and codified procedures that enhance fairness, security, and efficiency. Future reforms in Iran could focus on codifying anticipatory termination, standardizing restitution and compensation rules, and harmonizing domestic practice with international norms. Such reforms would strengthen legal certainty, protect contractual interests, and enhance Iran’s participation in global commerce, while retaining the flexible and fairness-oriented features of the Iranian khiyar system [28].

 Conclusion

Contract rescission in Iranian civil law is a vital legal mechanism, yet its fragmented statutory framework and reliance on jurisprudence limit predictability and uniformity in outcomes. Comparative law systems, particularly CISG and European civil codes, offer structured and predictable remedies, combining rescission with restitution and compensation. Codifying comprehensive rules in Iranian law would enhance legal certainty, protect parties’ interests, and facilitate both domestic and international transactions.

 Disclosure Statement

No potential conflict of interest reported by the authors.

 Funding

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

 Authors' Contributions

All authors contributed to data analysis, drafting, and revising of the paper and agreed to be responsible for all the aspects of this work.