Options and Their Types Under the Civil Code

Options and Their Types Under the Civil Code

Today, many individuals conduct their activities pursuant to contracts. One of the essential requirements for concluding any contract is adherence to its terms and fulfillment of the obligations arising from it.

The importance of compliance with contracts is so significant that it has been expressly addressed in the Civil Code, and the legislator has provided for damages for non-performance of contractual obligations.

However, despite the importance of honoring contracts, there are situations in which individuals, for various reasons, wish to terminate a transaction. In such circumstances, parties must rely on legal mechanisms and remedies to dissolve the concluded transaction. This possibility is provided by law through options, each with its own specific conditions for application.

Importance of Options in Transactions and Contracts

Options

Before explaining the concept of options, it is appropriate to note the importance and necessity of compliance with contractual obligations. Under Iranian Civil Law, contracts validly concluded between parties are binding, provided that they do not violate mandatory legal rules, and the parties are required to adhere to them. One of the legal mechanisms designed to protect individuals’ rights is the right to claim damages for non-performance of contractual obligations.

Nevertheless, there are instances in which parties seek to rescind a transaction. Options represent the legal tools and remedies that the legislator has provided for this purpose. The literal meaning of the term “option” is “choice” or “authority”. In legal terminology, options confer on the parties the right to rescind a transaction under specified conditions.

One of the defining characteristics of contracts and transactions is their binding nature, meaning that neither party may unilaterally terminate the contract except where a legal option exists, contractual termination conditions are met, or the parties mutually agree to rescind the contract. Options enable the parties to lawfully terminate a transaction by exercising those rights.

Option of the Session

Under the option of the session, each party to a transaction has the right to rescind the contract immediately after its conclusion. In contrast, both parties remain present at the place where the contract was concluded. This option applies only during the time the parties are present at the contractual session and is extinguished as soon as they leave, with no possibility of re-exercise.

Option of Animal Sale

As indicated by its name, this option applies to transactions in which the subject matter is an animal. Under this option, the buyer has the right to rescind the sale contract within 3 days of the sale’s conclusion. The right to exercise this option is granted exclusively to the buyer.

Option of Delay in Payment of the Price

If a contract of sale is concluded between the parties but the seller has not delivered the goods, and the buyer has not paid the purchase price, the seller is entitled to rescind the transaction by exercising the option of delay in payment. This option applies exclusively to contracts of sale and may only be exercised by the seller. The right to exercise this option lasts for three days from the date of the transaction.

The options mentioned above apply specifically to contracts of sale. However, other options may be exercised in both sales contracts and other types of contracts.

Option by Stipulation

In some cases, a condition may be included in the contract in favor of one party. Such a condition entitles the beneficiary to rescind the transaction if the stipulated condition is not fulfilled.

Determining a specific time period for fulfillment of the condition is of great importance, as failure to specify such a period may result in the invalidity of both the condition and the contract.

Option for Non-Conformity with Description

In certain cases, a person enters into a transaction based on descriptions and characteristics attributed to the subject matter. If, after the transaction and delivery, the property does not conform to the stated descriptions, the person may exercise the option for non-conformity with description and rescind the transaction.

Option of Inspection

This option applies when a person purchases property based on prior observation but, after the transaction, discovers that the property has changed or no longer conforms to its prior condition. In such cases, the aggrieved party, whether buyer or seller, is entitled to rescind the transaction.

Option of Gross Loss

One of the options provided by law is gross loss. Gross loss refers to significant financial detriment. If a party enters into a transaction at a price substantially inconsistent with the actual value of the subject matter and is thereby misled regarding its true value, the injured party may exercise the option of gross loss and request rescission of the transaction. Exercise of this option requires that the loss be substantial.

Option for Defect

This option applies when a buyer purchases property and later discovers a defect. In such cases, the buyer may either rescind the transaction or retain the property and claim from the seller the difference between the value of the sound and the defective property.

Option of Fraud

Fraud refers to deception. In some cases, one party induces the other to enter into a transaction through deceptive conduct. Any form of fraud entitles the deceived party to rescind the transaction.

Option of Partial Invalidity of the Transaction

This option applies when the transaction involves multiple items. For example, a person purchases five mobile phones under a single transaction.

If three of the phones are defective or fail to meet the agreed-upon characteristics at the time of the transaction, the buyer may exercise this option and rescind the transaction.

Frequently Asked Questions Regarding Options Under the Civil Code