Legal dissolution, as one of the causes of automatic termination of contracts, occurs by operation of law and without the intervention of the parties’ will, resulting in the extinguishment of contractual obligations. Nevertheless, its effect on the legal status of possession, particularly in terms of the transformation from fiduciary possession to liability-based possession, has consistently been a matter of ambiguity and scholarly debate. The central issue of this research is whether the mere occurrence of legal dissolution is sufficient to transform possession, or whether such transformation requires additional conditions. The aim of this article is to clarify the status of the parties’ possession following the occurrence of legal dissolution and to compare it with the status of possession in cases of nullity, temporal relative nullity, and rescission. Accordingly, the main research question is: what effect does legal dissolution have on the transformation of possession, and on what basis and from what point in time does this effect materialize? This research adopts a descriptive-analytical method, with a systematic approach to the provisions of the Civil Code (including Articles 483, 496, 497, 529 and 530), as well as jurisprudential principles and doctrinal perspectives. The findings indicate that, unlike nullity, legal dissolution does not automatically result in liability or the transformation of possession. Rather, the continuation of the prior legal characterization of possession remains defensible until the occurrence of conditions specific to each contract. Consequently, the transformation of possession whether from proprietary to fiduciary or to liability-based possession is conditional and context-dependent. It cannot be regarded as a direct and immediate effect of legal dissolution, in contrast to nullity in its broad sense, which entails retroactive invalidity from the outset.