Effect of the Termination of a Contract on Prior Transactions Based on the Doctrine of Constructive Loss: A Study of Judicial Practice
Keywords:
constructive loss, third-party rights, current market value, rescission, automatic dissolution, invalidityAbstract
According to legal principles, the termination of a contract may result either from legal acts such as rescission or mutual cancellation, from the automatic dissolution of the contract, or from the invalidity of the transaction due to the absence of the conditions required for its validity. Against this background, the present article addresses the question of whether, where the subject matter of a contract has been transferred to another person or other persons prior to the termination or invalidation of the transaction, such transfer may be analyzed within the framework of the doctrine of constructive loss. This issue has given rise to divergent legal theories as well as conflicting judicial decisions. Accordingly, in order to provide a more in-depth analysis of the matter, judicial decisions are examined, particularly Unification of Precedent Decision No. 810 of the General Assembly of the Supreme Court, dated May 25, 2021. In addition, the Law Requiring the Official Registration of Immovable Property Transactions, enacted in 2024, is analyzed and critically evaluated in order to further clarify the issue. Therefore, by analyzing the relevant legal considerations and examining the views of both proponents and opponents of applying the doctrine of constructive loss to the subject matter of a transaction, the present article also gives particular attention to judicial practice.
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Copyright (c) 2026 Seyedali Ebadi (Author); Gholamali Seifi Zeinab (Corresponding author); Seyed Pedram Khandani (Author)
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