Judgment of Regional Court in Cracow, 1st Civil Division

18 November 2004

Case No. IC 803/02

Rescission of construction contract

Contract interpretation

1. Pursuant to Civil Code Art. 656 §1 in connection with Art. 636 §1, where a contractor performs construction work in a manner not in compliance with the contract, the investor may demand that the contractor change its method of performance and set an appropriate deadline for the contractor to comply, after which the investor may rescind the contract, or hire another person to make the corrections or continue performance of the work, at the contractor's cost and risk.

2. Civil Code Art. 65 sets out the general, fundamental guidelines for contract interpretation: the will of the parties is to be discerned in light of principles of social existence and customary practice, within the factual context surrounding expression of the will of the parties. Principles of social coexistence mean that the parties' will should be understood in accordance with ethnical and moral principles observed within the society.

3. The purpose of interpretation is to discern the real content of the act of a given person when attempting to achieve a legal effect. The objective interpretation of a document may not be detached from the factual circumstances surrounding the creation of the document, and may not ignore the fact that it was drafted by a person who is not a professional attorney.

4. As a result of effective rescission of a contract, the legal relationship terminates ex tunc, as if there had been no contract. Rescission of the contract creates a new legal status between the parties; from rescission, the parties are no longer bound by the mutual contract or the mutual consideration provided for in the contract. Any consideration already exchanged between the parties should be restored.