CHAPTER 6

RESCISSIBLE CONTRACTS
4 Classes of defective contracts:
1. Rescissible contracts which is a contract that has case! a "articlar !a#a$e to one o% the "arties or to a &
r!
"erson an! which %or e'itable reasons #a( be set asi!e e)en i% it is
)ali!.
*. +oi!able contracts which is a contract in which the consent o% one "art( is !e%ecti)e, either becase o% want o% ca"acit( or becase it is )itiate!, bt which contract is )ali! ntil
set asi!e b( the co#"etent cort.
&. -nen%orceable Contracts which is a contract that %or so#e reason cannot be en%orce!, nless it is rati%ie! in the #anner "ro)i!e! b( law
.. +oi! or Ine/istent Contracts which is an absolte nllit( an! "ro!ces no e%%ect, as i% it ha! ne)er been e/ecte! or entere! into.
As to defect: As to effect: As to
prescriptibility of
action or defense:
As to susceptibility
of ratification:
As to who may assail
contracts
As to how contracts
may be assailed
RESCISSIBLE There is !a#a$e or
in0r( either to one o%
the contractin$ "arties
or to thir! "ersons.
Consi!ere! )ali! an!
en%orceable ntil the(
are rescin!e! b( a
co#"etent cort
The action %or
rescission #a(
"rescribe
Not ssce"tible o%
rati%ication
1a( be assaile! not
onl( b( a contractin$
"art( bt e)en b( a &
r!
"erson who is
"re0!ice! or !a#a$e!
b( the contract
1a( be assaile! !irectl(
onl(, an! not
collaterall(
!I"ABLE There is )itiation o%
consent or le$al
inca"acit( o% one o% the
contractin$ "arties.
Consi!ere! )ali! an!
en%orceable ntil the(
are annlle! b( a
co#"etent cort
The action %or
annl#ent or the
!e%ense o%
annlabilit( #a(
"rescribe.
Ssce"tible Can be assaile! onl( b(
a contractin$ "art(
1a( be assaile! !irectl(
or collaterall(
#$E$%!RCEABL
E
The contract is entere!
into in e/cess or
withot an( athorit(,
or !oes not co#"l( with
the Statte o% 2ra!s, or
both contractin$ "arties
are le$all( inca"acitate!
Cannot be en%orce! b( a
"ro"er action in cort
The corres"on!in$
action %or reco)er(, i%
there was total or
"artial "er%or#ance
o% the nen%orceable
contract n!er No. 1
or No. & o% Art. 1.3&,
#a( "rescribe
Ssce"tible 1a( be assaile! onl( b(
a contractin$ "art(
1a( be assaile! !irectl(
or collaterall(
!I" !R
I$E&IS'E$'
One or #ore o% the
essential re'isites o% a
)ali! contract are
lac4in$ either in %act or
law
As a $eneral rle, !o
not "ro!ce an( le$al
e%%ect
The action %or
!eclaration o% nllit(
or ine/istence or the
!e%ense o% nllit( or
ine/istence !oes not
"rescribe!
Not ssce"tible 1a( be assaile! not
onl( b( a contractin$
"art( bt e)en b( a &
r!
"erson whose interest is
!irectl( a%%ecte!
1a( be assaile! !irectl(
or collaterall(
Art. 1&53. Contracts )ali!l( a$ree! "on #a( be rescin!e! in the cases establishe! b( law. 61*738
Rescissible Contracts ( all o% the essential re'isites o% a contract e/ist an! the contract is )ali!, bt b( reason o%
in0r( or !a#a$e to either o% the contractin$ "arties or to &
r!
"ersons, sch as cre!itors, it #a( be rescin!e!.
Rescissible C) a contract with is )ali! becase it contains all o% the essential re'isites "rescribe! b( law, bt which
is !e%ecti)e becase o% in0r( or !a#a$e to either o% the contractin$ "arties or to &
r!
"ersons, as a conse'ence o% which
it #a( be rescin!e! b( #eans o% a "ro"er action %or rescission.
'!LE$'I$!: Relatively Ineffective Contract ( is !istin$ishe! %ro# the )oi!able contract in that its
ine%%ecti)eness, with res"ect to the "art( concerne!, is "ro!ce! i"so 0re, while a )oi!able contract !oes not beco#e
ino"erati)e nless an action to annl it is institte! an! allowe!. It !i%%ers %ro# the )oi! or ine/istent contract, in that
the ine%%ecti)eness o% the latter is absolte, becase it cannot be rati%ie!, while the relati)el( ine%%ecti)e contract can be
#a!e co#"letel( e%%ecti)e b( the consent o% the "erson as to who# it is ine%%ecti)e, or b( the cessation o% the
i#"e!i#ent which "re)ents its co#"lete e%%ecti)eness.
Characteristics:
1. Their !e%ect constittes in in0r( or !a#a$e either to one o% the contractin$ "arties or to &
r!
"ersons
*. Be%ore rescission, the( are )ali! an! there%ore, le$all( e%%ecti)e
&. The( can be attac4e! !irectl( onl(, an! not collaterall(
.. The( can be attac4e! onl( either b( a contractin$ "art( or b( a &
r!
"erson who is in0re! or !e%ra!e!
9. The( are ssce"tible o% con)ali!ation onl( b( "rescri"tion an! not b( rati%ication
'!LE$'I$!: Re*uisites of Rescission:
1. The contract #st be a rescissible contract, sch as those #entione! in Art. 1&51 an! 1&5*
*. The "art( as4in$ %or rescission #st ha)e no other le$al #eans to obtain re"aration %or the !a#a$es s%%ere! b( hi#
&. The "erson !e#an!in$ rescission #st be able to retrn whate)er he #a( be obli$e! to restore i% rescission is $rante!
.. The thin$s which are the ob0ect o% the contract #st not ha)e "asse! le$all( to the "ossession o% a &
r!
"erson actin$ in
$oo! %aith
9. The action %or rescission #st be bro$ht within the "rescri"ti)e "erio! o% . (ears.
Remission ( a re#e!( $rante! b( law to the contractin$ "arties, an! e)en to &
r!
"ersons, to secre the
re"aration o% !a#a$es case! to the# b( a contract, e)en i% the sa#e shol! be )ali!, b( #eans o% the restoration o%
thin$s to their con!ition "rior to the celebration o% the contract.
Rescission distin+uished from resolution of reciprocal obli+ations under Art) ,,-, of the Code (
si#ilarities both with res"ect to )ali!it( an! e%%ects
Rescission Resolution
As to party who may institute action: The action #a( be institte! not onl( b(
a "art( to the contract bt e)en a &
r!
"erson
The action #a( be institte! onl( b( a
"art( to the contract
As to causes: There are se)eral cases or $ron!s sch
as lesion, %ra! an! others e/"ressl(
s"eci%ie! b( law
The onl( $ron! is %ailre o% one o% the
"arties to co#"l( with what is inc#bent
"on hi#
As to power of the courts: In rescission there is no "ower o% the
corts to $rant an e/tension o% ti#e %or
"er%or#ance o% the obli$ation so lon$ as
there is a $ron! %or rescission
In resoltion the law e/"ressl( !eclares
that corts shall ha)e a !iscretionar(
"ower to $rant an e/tension %or
"er%or#ance "ro)i!e! that there is a 0st
case
As to contract which may be rescinded
or resolved:
In rescission an( contract, whether
nilateral or reci"rocal, #a( be
rescin!e!
Onl( reci"rocal contracts #a( be
resol)e!
$either must rescission be confused with rescission of a contract by mutual consent of the contractin+ parties (
Rescission b( #tal consent is si#"l( another contract %or the !issoltion o% a "re)ios one, an! its e%%ects, in relation
to the contract so !issol)e!, shol! be !eter#ine! b( the a$ree#ent #a!e b( the "arties, or b( the a""lication o% other
le$al "ro)isions, bt not b( Articles 1&59, which is not a""licable.
Art. 1&51. The %ollowin$ contracts are rescissible:
618 Those which are entere! into b( $ar!ians whene)er the war!s who# the( re"resent s%%er lesion b( #ore than
one;%orth o% the )ale o% the thin$s which are the ob0ect thereo%<
6*8 Those a$ree! "on in re"resentation o% absentees, i% the latter s%%er the lesion state! in the "rece!in$ n#ber<
6&8 Those n!erta4en in %ra! o% cre!itors when the latter cannot in an( other #anner collect the clai#s !e the#<
6.8 Those which re%er to thin$s n!er liti$ation i% the( ha)e been entere! into b( the !e%en!ant withot the 4nowle!$e
an! a""ro)al o% the liti$ants or o% co#"etent 0!icial athorit(<
698 All other contracts s"eciall( !eclare! b( law to be sb0ect to rescission. 61*71a8
Art. 1&5*. Pa(#ents #a!e in a state o% insol)enc( %or obli$ations to whose %l%ill#ent the !ebtor col! not be co#"elle! at the
ti#e the( were e%%ecte!, are also rescissible. 61*7*8
'!LE$'I$!: A )ali! contract can be rescin!e! onl( %or le$al case.
'he first of the rescissible contracts are those which are entered into by +uardians. This is withot "re0!ice to the
"ro)ision o% Art. 1&56 which states that rescission shall not ta4e "lace with res"ect to contracts a""ro)e! b( the corts.
-n!er the Rles o% Cort, a 0!icial $ar!ian enterin$ into a contract with res"ect to the "ro"ert( o% his war! #st
or!inaril( secre the a""ro)al o% a co#"etent cort
Also in case o% a %ather or #other consi!ere! as a natral $ar!ian o% the "ro"ert( o% a chil! n!er "arental athorit(
where sch "ro"ert( is worth #ore than P*333.
Contract in)ol)es the sale or enc#brance o% real "ro"ert(, 0!icial a""ro)al is in!is"ensable.
Conse'entl(, i% a $ar!ian sells, #ort$a$es or otherwise enc#bers real "ro"ert( belon$in$ to his war withot 0!icial
a""ro)al, the contract is nen%orceable, an! not rescissible e)en i% the latter s%%ers lesion or !a#a$e o% #ore than one;
%orth o% the )ale o% the "ro"ert(. Howe)er, i% he enters into a contract %allin$ within the sco"e o% his "owers as
$ar!ian o% the "erson an! "ro"ert(, or onl( o% the "ro"ert(, o% his war!, sch as when the contract in)ol)es acts o%
a!#inistration, e/"ress 0!icial a""ro)al is not necessar(, in which case the contract is rescissible i% the latter s%%ers
the lesion or !a#a$e #entione! in No. 1 o% Art. 1&51 o% the Co!e
'he second is contracts in behalf of Absentees ( Howe)er, sch contracts are not rescissible i% the( ha)e been
a""ro)e! b( the corts
Sa#e as those o% the $ar!ians, the "rinci"les ennciate! in the "rece!in$ section are also a""licable here.
'!LE$'I$!: A $ar!ian is athori=e! onl( to #ana$e the estate o% his war!< hence, he has no "ower to !is"ose o%
an( "ortion thereo% withot a""ro)al o% the cort.
Re*uisites for contracts entered into by +uardians in behalf of his ward or by a le+al representative in behalf of
an absentee:
1. The contract #st ha)e been entere! into b( a $ar!ian in behal% o% his war! or b( a le$al re"resentati)e in behal% o% an
absentee.
*. The war! or absentee #st ha)e s%%ere! lesion o% #ore than one;%orth o% the )ale o% the "ro"ert( which is the ob0ect
o% the contract
&. The contract #st ha)e been entere! into withot 0!icial a""ro)al
.. There #st be no other le$al #eans %or obtainin$ re"aration %or the lesion
9. The "erson brin$in$ the action #st be able to retrn whate)er he #a( be obli$e! to restore, an!
6. The ob0ect o% the contract #st not be le$all( in the "ossession o% a &
r!
"erson who !i! not act in ba! %aith
I% the ob0ect o% the contract is le$all( in the "ossession o% a &
r!
"erson who !i! not act in ba! %aith, the re#e!( a)ailable
to the "erson s%%erin$ the lesion is in!e#ni%ication %or !a#a$es an! not rescission
'he third is contracts in fraud of creditors ( this co#"le#ents Art. 11>> o% the Co!e which states that one o% the
re#e!ies a)ailable to the cre!itor a%ter he has e/haste! all the "ro"ert( in "ossession o% the !ebtor is to i#"$n the
acts which the latter #a( ha)e !one to !e%ra! hi#.
'!LE$'I$!: 'est of %raud ( In !eter#inin$ whether or not a certain con)e(ance is %ra!lent, the 'estion in
e)er( case is whether the con)e(ance was a bona %i!e transaction or a tric4 an! contri)ance to !e%eat cre!itors, or
whether it conser)es to the !ebtor a s"ecial ri$ht.
'!LE$'I$!: Si+ns of %raud:
1. The %act that the consi!eration o% the con)e(ance is ina!e'ate
*. A trans%er #a!e b( a !ebtor a%ter sit has been be$n an! while it is "en!in$ a$ainst hi#
&. A sale "on cre!it b( an insol)ent !ebtor
.. E)i!ence "% lar$e in!ebte!ness or co#"lete insol)enc(
9. The trans%er o% all or nearl( all o% his "ro"ert( b( a !ebtor, es"eciall( when he is insol)ent or $reatl( e#barrasse!
%inanciall(
6. The %act that the trans%er is #a!e between %ather an! son, when there are "resent an( o% the abo)e circ#stances
>. The %ailre o% the )en!ee to ta4e e/clsi)e "ossession o% all the "ro"ert(
Re*uisites before a contract can be rescinded on the +round that it has been entered into in fraud of creditors:
1. There #st be a cre!it e/istin$ "rior to the celebration o% the contract
*. There #st be a %ra!, or at least, the intent to co##it %ra!, or at least, the intent to co##it %ra! to the "re0!ice o%
the cre!itor see4in$ the rescission.
&. The cre!itor cannot in an( other le$al #anner collect his cre!it
.. The ob0ect o% the contract #st not be le$all( in the "ossession o% a &
r!
"erson who !i! not act in ba! %aith
I% the ob0ect o% the contract is le$all( in the "ossession o% a &
r!
"erson who !i! not act in ba! %aith, the re#e!( a)ailable
to the cre!itor is to "rocee! a$ainst the "erson casin$ the loss %or !a#a$es.
'he fourth is contracts referrin+ to thin+s under liti+ation ( The case conte#"late! in this n#ber is !i%%erent %ro#
that conte#"late! in the "rece!in$ n#ber. Here the "r"ose is to secre the "ossible e%%ecti)it( o% a clai#, while in
the "rece!in$ n#ber the "r"ose is to $arantee an e/istin$ cre!it< here there is a real ri$ht in)ol)e!, while in the
"rece!in$ n#ber there is a "ersonal ri$ht, both o% which !eser)e the "rotection o% the law. The( are si#ilar in the
sense that in both cases the "erson who can a)ail o% the re#e!( o% rescission is a stran$er to the contract
Contracts by insolvent ( n!er Art. 1&5*
In or!er that the "a(#ent can be rescin!e!, it is in!is"ensable:
1. That it #st ha)e been #a!e in a state o% insol)enc(
*. That the obli$ation #st ha)e been one which the !ebtor col! not be co#"elle! to "a( at the ti#e sch "a(#ent was
e%%ecte!.
It is clear that the basis o% the rescissible character o% the transaction is %ra! as in the case o% No. & an! . o% Art. 1&51
Insolvency ( it re%ers to the %inancial sitation o% the !ebtor b( )irte o% which is is i#"ossible %or hi# to %l%ill his
obli$ations. A 0!icial !eclaration o% insol)enc( is not, there%ore, necessar(.
Accor!in$ to 1anresa, the obli$ations conte#"late! b( this article co#"rehen! not onl( those with a ter# or which are
sb0ect to a ss"ensi)e con!ition, bt e)en )oi! an! natral obli$ations as well as those which are con!one! or which
ha)e "rescribe!.
E?. Ss"ensi)e con!ition let s ass#e that A is in!ebte! to B %or P13,333 an! to C %or P9,333. The obli$ation in
%a)or o% C is sb0ect to a ss"ensi)e con!ition. @hile in a state o% insol)enc(, A "a(s his obli$ation to C be%ore the
e/"iration o% the ter# or "erio!. Can B rescin! the "a(#entA -n!er art. 1&5*, there is no 'estion that the "a(#ent is
rescissible, bt then this conclsion wol! be in !irect con%lict with the "ro)ision o% No. 1 o% Art. 1175 o% the Co!e
n!er which A can be co#"elle! b( C to "a( the obli$ation e)en be%ore the e/"iration o% the sti"late! ter# or "erio!
since b( his insol)enc( he has alrea!( lost his ri$ht to the bene%it o% sch ter# or "erio!. Accor!in$ to 1anresa,
howe)er, the con%lict can easil( be resol)e! b( consi!erin$ the "riorit( o% !ates between the two !ebts. I% the obli$ation
with a "erio! beca#e !e be%ore the obli$ation to the cre!itor see4in$ the rescission beca#e !e, then the latter cannot
rescin! the "a(#ent e)en i% sch "a(#ent was e%%ecte! be%ore the e/"iration o% the "erio!< bt i% the obli$ation with a
"erio! beca#e !e a%ter the obli$ation to the cre!itor see4in$ the rescission beca#e !e, then the latter can rescin! the
"a(#ent.
'!LE$'I$!: Lesion is the in0r( which one o% the "arties s%%ers b( )irte o% a contract which is !isa!)anta$eos
to hi#.
'!LE$'I$!: Accion .auliana vs) Simulation
Accion .auliana Absolute Simulation
There is real alienation, bt it is %ra!lent There is no alienation bt a #ere "retense that one has been
#a!e
Can be alle$e! onl( b( the cre!itors "rior to the act B( all cre!itors, be%ore or a%ter the si#lation
I#"ossibilit( o% satis%(in$ the "lainti%%Bs clai# is re'ire! Not re'ire!
An action to set asi!e a )ali! contract Coes not see4 to set asi!e the si#late! contract, bt #erel(
!eclare its ine/istence
'!LE$'I$!: Rescission is a sbsi!iar( action, which "res""oses that the cre!itor has e/haste! the "ro"ert( o% the
!ebtor, which is i#"ossible on cre!its which cannot be en%orce! becase o% the ter# or con!ition.
'!LE$'I$!: There are "arties who #a( a""ear to ha)e beco#e cre!itors a%ter the alienation, bt who #a( be
consi!ere! as ha)in$ a "rior ri$ht an! entitle! to the accion "aliana:
1. Those whose clai#s were ac4nowle!$e! b( the !ebtor a%ter the alienation, bt the ori$in o% which ante!ate! the
alienation< the reco$nition !oes not $i)e rise to the cre!it, bt #erel( con%ir#s its e/istence. 2or instance, clai#s %or
!a#a$es arisin$ be%ore the alienation, bt ac4nowle!$e! b( the !ebtor onl( a%ter the alienation
*. Those who beco#es sbro$ate!, be%ore the alienation, in the ri$hts o% cre!itors whose cre!it were "rior to the
alienation
!ther rescissible contracts ( Arts. 1375, 1157, 19*6, 19&., 19&7, 19.*, 1996, 1963, 196>, an! 1697 o% the Co!e
Art. 1&5&. The action %or rescission is sbsi!iar(< it cannot be institte! e/ce"t when the "art( s%%erin$ !a#a$e has no other
le$al #eans to obtain re"aration %or the sa#e. 61*7.8
Be%ore a "art( who is "re0!ice! can a)ail hi#sel% o% this re#e!(, it is essential that he has e/haste! all o% the other
le$al #eans to obtain re"aration
I% it can be establishe! that the "ro"ert( which is alienate! or trans%erre! b( the !ebtor to another was his onl( "ro"ert(
at the ti#e o% the transaction, an action %or rescission can certainl( be #aintaine! becase it is clear that in sch case
the cre!itor can ha)e no other re#e!(.
.arties who may institute action:
1. The "erson who is "re0!ice!, sch as the "art( s%%erin$ the lesion in rescissor( actions on the $ron! o% lesion, the
cre!itor who is !e%ra!e! in rescissor( action on the $ron! o% %ra!, an! other "ersons athori=e! to e/ercise the sa#e
in other rescissor( actions.
*. Their re"resentati)es
&. Their heirs 6a ri$ht to the le$iti#e is si#ilar to a cre!it o% a cre!itor8 he #a( !o so as a re"resentati)e o% the "erson
who s%%ers %ro# lesion or o% the cre!itor who is !e%ra!e!. Howe)er, i% it can be establishe! that the !ece!ent entere!
into a contract with another in or!er to !e%ra! hi# o% his le$iti#e, he has no ri$ht to institte the action.
.. Their cre!itors b( )irte o% the sbro$ator( action !e%ine! in Art. 11>> o% the Co!e
Art. 1&5.. Rescission shall be onl( to the e/tent necessar( to co)er the !a#a$es case!. 6n8
The "r"ose o% rescission is re"aration %or the !a#a$e or in0r( which is s%%ere! either b( a "art( to the contract or b(
a &
r!
"erson. Rescission nee! not be total in character, it #a( also be "artial.
Art. 1&59. Rescission creates the obli$ation to retrn the thin$s which were the ob0ect o% the contract, to$ether with their %rits,
an! the "rice with its interest< conse'entl(, it can be carrie! ot onl( when he who !e#an!s rescission can retrn whate)er he
#a( be obli$e! to restore. ;;; rescissor( action on the $ron! o% lesion
Neither shall rescission ta4e "lace when the thin$s which are the ob0ect o% the contract are le$all( in the "ossession o% thir!
"ersons who !i! not act in ba! %aith.
In this case, in!e#nit( %or !a#a$es #a( be !e#an!e! %ro# the "erson casin$ the loss. 61*798
The %irst "ara$ra"h is a""licable onl( to rescissor( actions on the $ron! o% lesion an! not to rescissor( actions on the
$ron! o% %ra!. This is so becase in the latter there can certainl( be no obli$ation on the "art o% the "lainti%%;cre!itor
to restore an(thin$ since he has not recei)e! an(thin$.
Rescission is not "ossible, nless he who !e#an!s it can retrn whate)er he #a( be obli$e! to restore.
i.e. where a $ar!ian alienates the "ro"erties o% a #inor %or P59,333 to a certain "erson, an! sbse'entl(, the #inor
"on reachin$ the a$e o% #a0orit(, brin$s an action %or the rescission o% the contract on the $ron! o% lesion, the e%%ect
i% rescission is $rante! wol! be the restoration o% thin$s to their con!ition "rior to the celebration o% the contract. Bt
i% the "lainti%% cannot re%n! the a#ont incl!in$ interest, the action will certainl( %ail becase "ositi)e stattor( law,
no less than ni%or# cort !ecisions, re'ire, as a con!ition "rece!ent to rescission, that the consi!eration recei)e!
shol! be re%n!e!.
%ruits of the thin+ ( re%er not onl( to natral, in!strial an! ci)il %rits bt also to other accessions obtaine! b( the
thin$, while interest re%ers to le$al interest.
It #st be obser)e! that as %ar as the obli$ation to restore the %rits is concerne!, the rles on "ossession shall be
a""lie!.
The !eter#ination o% the $oo! or ba! %aith o% the "art( obli$e! to restore is o% transcen!ental i#"ortance in or!er to
assess the %rits or the )ale thereo% which #st be retrne! as well as the e/"enses which #st be rei#brse!.
i.e. as a con!ition to the rescission o% a contract o% sale o% a "arcel o% lan!, the )en!or #st re%n! the )en!ees 6who
are in $oo! %aith8 an a#ont e'al to the "rchase "rice, "ls the s# e/"an!e! b( the# in i#"ro)in$ the lan!.
The secon! "ara$ra"h this a""lies to all 4in!s o% rescissible contracts.
/ re*uisites in order that the ac*uisition of the thin+ which consitutues the ob0ect of the contract by a 1
rd
person
shall defeat an action for rescission:
1. That the thin$ #st be le$all( in the "ossession o% the &
r!
"erson
*. That sch "erson #st not ha)e acte! in ba! %aith.
I% the thin$ is #o)able, the concrrence o% these re'isites o%%er no !i%%iclt( becase o% the "rinci"le that "ossession o%
#o)able "ro"ert( ac'ire! in $oo! %aith is e'i)alent to a title.
I% the thin$ is i##o)able, the ri$ht o% the &
r!
"erson #st be re$istere! or recor!e! in the "ro"er re$istr( be%ore we can
sa( that the thin$ is le$all( in his "ossession or what a#onts to the sa#e thin$, be%ore he is "rotecte! b( law.
A &
r!
"erson to who# the realt( has been trans%erre! who has not re$istere! his ri$ht in the "ro"er re$istr( cannot be
"rotecte! a$ainst the e%%ects o% a 0!$#ent ren!ere! in the action %or rescission. Howe)er, where he has re$istere! his
ri$ht o)er the realt( n!er the Lan! Re$istration Act, there wol! be no le$al obstacles to the trans%er o% the title o% the
sai! "ro"ert(, an! %or this reason the sai! trans%er cannot be rescin!e!.
The i#"ossibilit( o% #aintainin$ an action %or the rescission o% the contract where the ob0ect is le$all( in the "ossession
o% a &
r!
"erson in $oo! %aith, the "erson who is "re0!ice! is not le%t withot an( re#e!(. He #a( still brin$ an action
%or in!e#nit( %or !a#a$es a$ainst the "erson who case! the loss.
Art. 1&56. Rescission re%erre! to in Nos. 1 an! * o% Article 1&51 shall not ta4e "lace with res"ect to contracts a""ro)e! b( the
corts. 61*76a8
Art. 1&5>. All contracts b( )irte o% which the !ebtor alienates "ro"ert( b( $ratitos title are "res#e! to ha)e been entere! into
in %ra! o% cre!itors, when the !onor !i! not reser)e s%%icient "ro"ert( to "a( all !ebts contracte! be%ore the !onation.
Alienations b( oneros title are also "res#e! %ra!lent when #a!e b( "ersons a$ainst who# so#e 0!$#ent has been isse!.
The !ecision or attach#ent nee! not re%er to the "ro"ert( alienate!, an! nee! not ha)e been obtaine! b( the "art( see4in$ the
rescission.
In a!!ition to these "res#"tions, the !esi$n to !e%ra! cre!itors #a( be "ro)e! in an( other #anner reco$ni=e! b( the law o%
e)i!ence. 61*7>a8
Art. 1&55. @hoe)er ac'ires in ba! %aith the thin$s alienate! in %ra! o% cre!itors, shall in!e#ni%( the latter %or !a#a$es s%%ere!
b( the# on accont o% the alienation, whene)er, !e to an( case, it shol! be i#"ossible %or hi# to retrn the#.
I% there are two or #ore alienations, the %irst ac'irer shall be liable %irst, an! so on sccessi)el(. 61*75a8
.roof of %raud ( %ra! or intent to !e%ra! #a( be either "res#e! in accor!ance with Art. 1&5> o% the Co!e or !l(
"ro)e! in accor!ance with the or!inar( rles o% e)i!ence.
.resumption of %raud 2fraud of creditors in the followin+ cases3:
1. Alienations o% "ro"ert( b( $ratitos title i% the !ebtor has not reser)e! s%%icient "ro"ert( to "a( all o% his !ebts
contracte! be%ore sch alienations.
*. Alienations o% "ro"ert( b( oneros title i% #a!e b( a !ebtor a$ainst who# so#e 0!$#ent has been ren!ere! in an(
instance or so#e writ o% attach#ent has been isse!. The !ecision or attach#ent nee! not re%er to the "ro"ert( alienate!
an! nee! not ha)e been obtaine! b( the "art( see4in$ the rescission.
Ths, where the !ebtor alienate! a certain "ro"ert(, which was his onl( attachable "ro"ert(, to his son a%ter 0!$#ent
ha! been ren!ere! a$ainst hi# an! a writ o% e/ection ha! been isse!, there is "res#"tion that sch alienation is
%ra!lent in accor!ance with the rle state! in the *
n!
"ara$ra"h o% Art. 1&5>. This "res#"tion beco#es stron$er
when it is establishe! that the con)e(ance b( the 0!$#ent !ebtor is %or the "r"ose o% "re)entin$ the 0!$#ent
cre!itor or other cre!itors %ro# sei=in$ the "ro"ert(. Bt where no 0!$#ent or "reli#inar( attach#ent e/ists a$ainst
the !ebtor, the "res#"tion is not a""licable.
It #st be obser)e! that the abo)e "res#"tions are !is"table, an! there%ore #a( be rebtte! b( satis%actor( an!
con)incin$ e)i!ence to the contrar(. Ths, i% it can be establishe! that the trans%eree ac'ire! the "ro"ert( in $oo!
%aith, withot the least intention o% i#"airin$ the 0!$#ent obtaine! b( the cre!itor a$ainst the trans%eror, an! that he
"ai! the "rchase "rice in the belie% that the latter col! %reel( !is"ose o% the sai! "ro"ert(, the "res#"tion o% %ra! is
o)erthrown.
It is not in!is"ensable that the cre!itor shall ha)e to !e"en! "on the two "res#"tions establishe! in the 1
st
an! *
n!
"ara$ra"hs o% Art. 1&5> in or!er to "ro)e the e/istence o% %ra! or the intention to !e%ra!
Accor!in$ to the &
r!
"ara$ra"h o% the sa#e article, the !esi$n to !e%ra! cre!itors #a( be "ro)e! in an( other #anner
reco$ni=e! b( the law o% e)i!ence.
Ths, in !eter#inin$ whether or not a certain con)e(ance is %ra!lent the 'estion in e)er( case is whether the
con)e(ance was a bona fide transaction or #erel( a tric4 or contri)ance to !e%eat cre!itors. It is not s%%icient that it is
%on!e! on a $oo! or )alable case or consi!eration or is #a!e with bona fide intent: it #st ha)e both ele#ents. I%
!e%ecti)e in either o% these "articlars, altho$h $oo! between the "arties, it is rescissible as %ar as the cre!itors are
concerne!.
The test as to whether or not a con)e(ance is %ra!lent is !oes it "re0!ice the ri$hts o% cre!itorsA
In the consideration of whether or not certain transfers or conveyances are fraudulent4 the followin+
circumstances have been denominated by the courts as bad+es of fraud)
1. The %act that the case or consi!eration o% the con)e(ance is ina!e'ate.
*. A trans%er #a!e b( a !ebtor a%ter sit has been be$n an! while it is "en!in$ a$ainst hi#
&. A sale on cre!it b( an insol)ent !ebtor
.. E)i!ence o% lar$e in!ebte!ness or co#"lete insol)enc(
9. The trans%er o% all or nearl( all o% his "ro"ert( b( a !ebtor, es"eciall( when he is insol)ent or $reatl( e#barrasse!
%inanciall(
6. The %act that the trans%er is #a!e between %ather an! son, when there are "resent others o% the abo)e circ#stances
>. The %ailre o% the )en!ee to ta4e e/clsi)e "ossession o% all the "ro"ert(
i.e. where it is "ro)e! that a certain cor"oration, which is hea)il( in!ebte! to a certain ban4, sol! a lar$e
tract o% lan! worth P.33,333 to the )en!ee %or onl( P&6,333 in s"ite o% the %act that at the ti#e o% sch sale it !i! not
ha)e an( li'i!ate! assets an! that all o% its other assets were "le!$e! or #ort$a$e!, so#e o% which were %or %ar #ore
than their actal )ale, sch circ#stances wol! be s%%icient to establish the %ra!lent character o% the con)e(ance.
Conse'entl(, the sale can be set asi!e b( #eans o% an action %or rescission at the instance o% the cre!itor. Bt where
the sale is %on!e! on a %ictitios case or consi!eration it wol! be %tile %or sch cre!itor to in)o4e its rescission
since sch action "res""oses the e/istence o% a )ali!, not ine/istent, to contract. The re#e!( o% the cre!itor in sch
case wol! be to as4 %or a !eclaration o% nllit( o% the con)e(ance.
The #ere %act o% relationshi" between )en!or an! )en!ee, as when the )en!or is the )en!eeBs #other, is not
in itsel% an ele#ent o% %ra!, i% the sale was #a!e %or a )alable consi!eration an! sai! )en!or was not at the ti#e o%
the con)e(ance insol)ent.
The test as to whether or not a con)e(ance is %ra!lent is to !eter#ine whether or not it is "re0!icial to the
ri$hts o% the cre!itors, ne)ertheless, it is also tre that sch a test wol! not be a""licable i% the con)e(ance is #a!e in
$oo! %aith or with a bona fide intent an! %or a )alable case or consi!eration.
I% the "ro"ert( is ac'ire! b( a "rchaser in $oo! %aith an! %or )ale, the ac'isition as %ar as the law is
concerne! is not %ra!lent. The contract or con)e(ance is not rescissible
I% the ac'isition b( the &
r!
"erson in ba! %aith the contract or con)e(ance is rescissible. In sch case the
cre!itor who is "re0!ice! can still "rocee! a%ter the "ro"ert(. Howe)er, i% %or an( case or reason, it shol! be
i#"ossible %or the ac'irer in ba! %aith to retrn the "ro"ert(, he shall in!e#ni%( the cre!itor see4in$ the rescission %or
!a#a$es s%%ere! on accont o% the alienation.
I% it ha""ens that there are two or #ore alienations, the %irst ac'irer shall be liable %irst, an! so on
sccessi)el(,
i.e. I% A, a$ainst who# a 0!$#ent %or the "a(#ent o% a certain !ebt in %a)or o% ? has been ren!ere!,
con)e(s his onl( "ro"ert( to B in %ra! o% ?, an! B, who is aware o% the %ra!, in trn, con)e(s to the "ro"ert( to C,
an! the latter, who is also aware o% the %ra!, also con)e(s the "ro"ert( to C, who is a "rchaser in $oo! %aith an! %or
)ale, altho$h the con)e(ance to C cannot be rescin!e!, (et ? can still "rocee! a$ainst B %or !a#a$es s%%ere! b(
hi# on accont o% the %ra!lent alienation, an! i% he %ails to reco)er he can still "rocee! a$ainst C. It #st be note!
that i% the reason %or the i#"ossibilit( o% retrnin$ the "ro"ert( ac'ire! in ba! %aith is a %ortitos e)ent, then n!er
the "rinci"le annonce! in Art. 11>. o% the Co!e, there can be no liabilit( o% the ac'irer.
Art. 1&57. The action to clai# rescission #st be co##ence! within %or (ears.
2or "ersons n!er $ar!ianshi" an! %or absentees, the "erio! o% %or (ears shall not be$in ntil the ter#ination o% the %or#erDs
inca"acit(, or ntil the !o#icile o% the latter is 4nown. 61*778
'!LE$'I$!: A #inor who is a "art( to a contract o% sale #st brin$ the action %or rescission within . (ears a%ter
attainin$ the a$e o% #a0orit(, becase n!er the "resent article the clai# o% rescission "rescribes in . (ears %ro#
re#o)al o% oneBs inca"acit(
-n!er no. & an! . n!er Art. 1&5*, it #st be conte! %ro# the ti#e o% the !isco)er( o% the %ra!.
In certain cases o% contracts o% sale which are s"eciall( !eclare! b( law to be rescissible, howe)er, the "rescri"ti)e
"erio! %or the co##ence#ent o% the action is si/ #onths or e)en %ort( !a(s, conte! %ro# the !a( o% !eli)er(.
CHAPTER >
+OICABLE CONTRACTS
oidable Contracts ( #a( be !e%ine! as those where in which all o% the essential ele#ents %or )ali!it( are "resent,
altho$h the ele#ent o% consent is )itiate! either b( lac4 o% le$al ca"acit( o% one o% the contractin$ "arties, or b(
#ista4e, )iolence, inti#i!ation, n!e in%lence, or %ra!.
'!LE$'I$!: +oi!able or annllable contracts are e/istent, )ali! an! bin!in$, altho$h the( can be annlle! becase
o% want o% ca"acit( or )itiate! consent o% one o% the "arties, bt be%ore alienation, the( are e%%ecti)e an! obli$ator(
between the "arties.
The #ost essential %eatre is that it is bin!in$ ntil it is annlle! b( a co#"etent cort.
Once it is e/ecte! there are onl( two "ossible alternati)es le%t to the "art( who #a( in)o4e its )oi!able character to
attac4 its )ali!it( or to con)ali!ate it either b( rati%ication or b( "rescri"tion.
Its )ali!it( #a( be attac4e! either !irectl( b( #eans o% a "ro"er action in cort or in!irectl( b( wa( o% !e%ense. The
action itsel% is calle! annl#ent in or!er to !istin$ish it %ro# an action %or the rescission o% rescissible contracts or
%ro# an action %or the !eclaration o% absolte nllit( or ine/istence o% )oi! or ine/istent contracts, while the !e%ense
itsel% is calle! annlabilit( or relati)e nllit( in or!er to !istin$ish it %ro# the !e%ense o% absolte nllit( or ine/istent
in )oi! or ine/istent contracts or the !e%ense o% nen%orceabilit( in nen%orceable contracts
'!LE$'I$!: $ullity vs) Rescission
$ullity Rescission
As its na#e i#"lies, !eclares the ine%%icac( which the contract
alrea!( carries in itsel%
1erel( "ro!ces that ine%%icac(, which !i! not e/ist essentiall(
in the contract
To be cre!, re'ires an act o% rati%ication To be ine%%ecti)e, nee!s no rati%ication
The !irect in%lence o% the "blic interest is note! Pri)ate interest alone $o)en
Sanction< the law "re!o#inatin$ in the %or#er Re#e!(< e'it(
Can be !e#an!e! onl( b( the "arties to the contract 1a( be !e#an!e! e)en b( &
r!
"arties a%%ecte! b( it
'!LE$'I$!: Re"entance is not a $ron! %or nlli%ication
Characteristics:
1. Their !e%ect consists in the )itiation o% consent o% one o% the contractin$ "arties
*. The( are bin!in$ ntil the( are annlle! b( a co#"etent cort
&. The( are ssce"tible o% con)ali!ation b( rati%ication or b( "rescri"tion
Their !e%ect or )oi!able character cannot be in)o4e! b( &
r!
"ersons
oidable Contracts Rescissible Contracts
The !e%ect is intrinsic becase it consists o% a )ice which
)itiates consent
The !e%ect is e/ternal becase it consists o% !a#a$e or
"re0!ice either to one o% the contractin$ "arties or to a &
r!
"erson
The contract is )oi!able e)en i% there is no !a#a$e or The contract is not rescissible i% there is no !a#a$e or
"re0!ice "re0!ice
The annlabilit( o% the contract is base! on the law.
Annl#ent is not onl( a re#e!( bt a sanction. Pblic interest
"re!o#inates
The rescissibilit( o% the contract is base! on e'it(. Rescission
is a #ere re#e!(. Pri)ate interest "re!o#inates
The case %or annl#ent are !i%%erent %ro# the cases %or rescission.
Ssce"tible o% rati%ication Not ssce"tible
Annl#ent #a( be in)o4e! onl( b( a contractin$ "art( Rescission #a( be in)o4e! either b( a contractin$ "art( or b(
a &
r!
"erson who is "re0!ice!.
Art. 1&73. The %ollowin$ contracts are )oi!able or annllable, e)en tho$h there #a( ha)e been no !a#a$e to the contractin$
"arties:
618 Those where one o% the "arties is inca"able o% $i)in$ consent to a contract<
6*8 Those where the consent is )itiate! b( #ista4e, )iolence, inti#i!ation, n!e in%lence or %ra!.
These contracts are bin!in$, nless the( are annlle! b( a "ro"er action in cort. The( are ssce"tible o% rati%ication. 6n8
It #st be obser)e! that in a )oi!able contract all o% the essential re'isites %or )ali!it( are "resent, altho$h the
re'isite o% consent is !e%ecti)e becase one o% the contractin$ "arties !oes not "ossess the necessar( le$al ca"acit(, or
becase it is )itiate! b( #ista4e, )iolence, inti#i!ation, n!e in%lence or %ra!.
I% consent is absoltel( lac4in$ or si#late! the contract is ine/istent, not )oi!able.
@hether a contract which the law consi!ers as )oi!able has alrea!( been cons##ate! or is #erel( e/ector( is
i##aterial< it can alwa(s be annlle! b( a "ro"er action in cort.
REAC 2ELIPE +S. HEIRS O2 ALCON 6"a$e. 9*18
Art. 1&71. The action %or annl#ent shall be bro$ht within %or (ears.
This "erio! shall be$in:
In cases o% inti#i!ation, )iolence or n!e in%lence, %ro# the ti#e the !e%ect o% the consent ceases.
In case o% #ista4e or %ra!, %ro# the ti#e o% the !isco)er( o% the sa#e.
An! when the action re%ers to contracts entere! into b( #inors or other inca"acitate! "ersons, %ro# the ti#e the $ar!ianshi"
ceases. 61&31a8
I% the action is not co##ence! within sch "erio!, the ri$ht o% the "art( entitle! to institte the action shall "rescribe.
Shol! the !e%ense also "rescribe within the sa#e "erio! as the action %or annl#entA Altho$h Art. 1&71 s"ea4s onl(
o% the action, S"anish co##entators a!)ance the )iew that the !e%ense shall also "rescribe a%ter the la"se o% . (ears,
since the basis o% the action an! the basis o% the !e%ense are i!entical
In Bra+an5a vs) illa Abrille, howe)er, the SC !eclare! that Ethere is reason to !obt the "ertinenc( o% the "erio!
%i/e! b( Art. 1&71 o% the Ci)il Co!e where #inorit( is set " onl( as a !e%ense to an action, withot the #inors as4in$
%or an( "ositi)e relie% %ro# the contract. onl( an ass#"tion bt #ore 0st an! lo$ical
i.e. 1rs. S borrowe! P*3,333 %ro# PF. She an! her 17;(ear ol! son, 1ario, si$ne! the "ro#issor( note %or the loan,
which note !i! not sa( an(thin$ abot the ca"acit( o% the si$ners. 1rs. S #a!e "artial "a(#ents little b( little. A%ter >
(ears, she !ie! lea)in$ a balance o% P13,333 on the note. PF !e#an!e! "a(#ent %ro# 1ario who re%se! to "a(. @hen
se! %or the a#ont, 1ario raise! the !e%ense: that he si$ne! the note when he was still a #inor. Shol! the !e%ense be
sstaine!A @h(A
Answer No. 1 The !e%ense shol! be sstaine!. 1ario cannot be bon! b( his si$natre in the "ro#issor( note. It
#st be obser)e! that the "ro#issor( note !oes not sa( an(thin$ abot the ca"acit( o% the si$ners. In other wor!s, there
is no acti)e %ra! or #isre"resentation< there is #erel( silence or constrcti)e %ra! or #isre"resentation. It wol! ha)e
been !i%%erent i% the note sa(s that 1ario is o% a$e. The "rinci"le o% esto""el wol! then a""l(. 1ario wol! not be
allowe! to in)o4e the !e%ense o% #inorit(. The "ro#issor( note wol! then ha)e all the e%%ects o% a "er%ectl( )ali!
note. Hence, as %ar as 1arioBs share in the obli$ation is concerne!, the "ro#issor( note is )oi!able becase o% #inorit(.
He cannot be absol)e! entirel( %ro# the #onetar( res"onsibilit(. -n!er the Ci)il Co!e, e)en i% his written contract is
)oi!able becase o% #inorit( he shall #a4e restittion to the e/tent that he #a( ha)e been bene%ite! b( the #one(
recei)e! b( hi# 6Art. 1&77, CC8. Tre, #ore than %or (ears ha)e alrea!( ela"se! %ro# the ti#e that 1ario ha!
attaine! the a$e o% *1. A""arentl(, his ri$ht to inter"ose the !e%ense has alrea!( "rescribe!. It has been hel!, howe)er,
that where #inorit( is se! as a !e%ense an! no "ositi)e relie% is "ra(e! %or, the .;(ear "erio! 6Art. 1&71, CC8 !oes not
a""l(. Here 1ario is #erel( inter"osin$ his #inorit( as an e/cse %ro# liabilit(.
Answer No. * The !e%ense shol! not be sstaine!. It #st be note! that the action %or annl#ent was institte! b(
PF a$ainst 1ario when the latter was alrea!( *6 (ears ol!. There%ore, the ri$ht o% 1ario to in)o4e his #inorit( as a
!e%ense has alrea!( "rescribe!. Accor!in$ to the CC, actions %or annl#ent o% )oi!able contracts shall "rescribe a%ter .
(ears. In the case o% contracts which are )oi!able b( reason o% #inorit( or inca"acit(, the .;(ear "erio! shall be
conte! %ro# the ti#e the $ar!ianshi" ceases 6Art. 1&718. The sa#e rle shol! also be a""lie! to the !e%ense. In the
instant case, since #ore than . (ears alrea!( ela"se! %ro# the ti#e 1ario ha! attaine! the a$e o% *1, there%ore, he can
no lon$er inter"ose his #inorit( as a !e%ense. It wol! ha)e been !i%%erent i% %or (ear ha! not (et ela"se! %ro# the
ti#e 1ario ha! attaine! the a$e o% *1. Since there was no acti)e %ra! or #isre"resentation on his "art at the ti#e o%
e/ection o% the "ro#issor( note, it is clear that the contract is )oi!able as %ar as he is concerne!. In sch case, the
!e%ense o% #inorit( shol! then be sstaine!.
Art. 1&7*. Rati%ication e/tin$ishes the action to annl a )oi!able contract. 61&37a8
Art. 1&7&. Rati%ication #a( be e%%ecte! e/"ressl( or tacitl(. It is n!erstoo! that there is a tacit rati%ication i%, with 4nowle!$e o%
the reason which ren!ers the contract )oi!able an! sch reason ha)in$ cease!, the "erson who has a ri$ht to in)o4e it shol!
e/ecte an act which necessaril( i#"lies an intention to wai)e his ri$ht. 61&11a8
Art. 1&7.. Rati%ication #a( be e%%ecte! b( the $ar!ian o% the inca"acitate! "erson. 6n8
Art. 1&79. Rati%ication !oes not re'ire the con%or#it( o% the contractin$ "art( who has no ri$ht to brin$ the action %or
annl#ent. 61&1*8
Art. 1&76. Rati%ication cleanses the contract %ro# all its !e%ects %ro# the #o#ent it was constitte!. 61&1&8
Besi!es "rescri"tion, the action %or annl#ent o% a )oi!able contract #a( also be e/tin$ishe! b( rati%ication.
Ratification or confirmation ( the act or #eans b( )irte o% which e%%icac( is $i)en to a contract which s%%ers %ro# a
)ice o% crable nllit(.
'!LE$'I$!: Confirmation ( is the act b( which a "erson, entitle! to brin$ an action %or annl#ent, with
4nowle!$e o% the case o% annl#ent an! a%ter it has cease! to e/ist, )ali!ates the contract either e/"ressl( or i#"lie!l(
'!LE$'I$!: Ratification ( is the act o% a""ro)in$ a contract entere! into b( another withot the athori=ation o%
the "erson in whose na#e it was entere! into, or be(on! the sco"e o% the athorit( o% the %or#er.
'he code ma6es no more distinction between confirmation and ratification)
Re*uisites of Ratification:
1. The contract shol! be tainte! with a )ice which is ssce"tible o% bein$ cre! "res""oses the e/istence o% a )ice in
the contract becase otherwise it wol! not ha)e an( ob0ect. 2rther#ore, sch )ice shol! be ssce"tible o% bein$
cre! becase otherwise the contract wol! be )oi! or ine/istent an! not ssce"tible o% con%ir#ation.
*. The con%ir#ation shol! be e%%ecte! b( the "erson who is entitle! to !o so n!er the law i#"lie! %ro# the "ro)isions
o% Arts. 1&7. an! 1&79
&. It shol! be e%%ecte! with 4nowle!$e o% the )ice or !e%ect o% the contract Art. 1&7&. Since con%ir#ation is abo)e all a
%or# o% e/"ressin$ the will, as sch it re'ires, in!e"en!entl( o% the act to which it re%ers, the sa#e con!itions o%
%ree!o#, 4nowle!$e an! charit( which consent also re'ires, altho$h it !oes not re'ire the con%or#it( o% the other
"art( who has no ri$ht to in)o4e the nllit( o% the contract. I% the contract is tainte! with se)eral )ices, sch as when it
has been e/ecte! thro$h #ista4e or %ra!. In sch case, i% the "erson entitle! to e%%ect the con%ir#ation rati%ies or
con%ir#s the contract with 4nowle!$e o% the #ista4e, bt not o% %ra!, his ri$ht to as4 %or annl#ent is not e/tin$ishe!
thereb( since the rati%ication or con%ir#ation has onl( "r$e! the contract o% #ista4e, bt not o% %ra!
.. The case o% the nllit( or !e%ect shol! ha)e alrea!( !isa""eare!
Ratification:
E7press R) ( i%, with 4nowle!$e o% the reason which ren!ers the contract )oi!able an! sch reason ha)in$
cease!, the "erson who has a ri$ht to in)o4e it shol! e/"ressl( !eclare his !esire to con)ali!ate it, or what a#onts to
the sa#e thin$, to renonce his ri$ht to annl the contract.
'acit R) i%, with 4nowle!$e o% the reason which ren!ers the contract )oi!able an! sch reason ha)in$
cease!, the "erson who has a ri$ht to in)o4e it shol! e/ecte an act which necessaril( i#"lies an intention to wai)e his
ri$ht.
Effects of ratification:
Art ,1-/ ( rati%ication e/tin$ishes the action to annl the contract
Art) ,1-8 ( it cleanses the contract o% its !e%ect %ro# the #o#ent it was constitte!.
'!LE$'I$!: Retroacti)it( o% Rati%ication its e%%ects retroact to the #o#ent where the contract was
entere! into.
Art. 1&7>. The action %or the annl#ent o% contracts #a( be institte! b( all who are thereb( obli$e! "rinci"all( or sbsi!iaril(.
Howe)er, "ersons who are ca"able cannot alle$e the inca"acit( o% those with who# the( contracte!< nor can those who e/erte!
inti#i!ation, )iolence, or n!e in%lence, or e#"lo(e! %ra!, or case! #ista4e base their action "on these %laws o% the
contract. 61&3*a8
Re*uisites to confer the necessary capacity for the e7ercise of the action for annulment:
1. The "lainti%% #st ha)e an interest in the contract
*. That the )icti# an! not the "art( res"onsible %or the )ice or !e%ect #st be the "erson who #st assert the sa#e.
Fenerall(, &
r!
"erson cannot institte an action %or its annl#ent. E/ce"tion accor!in$ to SC, a "erson who is not a
"art( obli$e! "rinci"all( or sbsi!iaril( n!er a contract #a( e/ercise an action %or annl#ent o% the contract i% he is
"re0!ice! in his ri$hts with res"ect to one o% the contractin$ "arties, an! can show the !etri#ent which wol!
"ositi)el( reslt to hi# %ro# the contract in which he has no inter)ention i.e. where the re#ainin$ "artners o% a
"artnershi" e/ecte! a chattel #ort$a$e o)er the "ro"erties o% the "artnershi" in %a)or o% a %or#er "artner to the
"re0!ice o% cre!itors o% the "artnershi", the latter ha)e a "er%ect ri$ht to %ile the action to nllit( the chattel #ort$a$e.
The secon! re'isite is base! on the well;4nown "rinci"le o% e'it( that whoe)er $oes to cort #st !o so with clean
han!s.
i.e. ?, o% a$e, entere! into a contract with G, a #inor. ? 4new an! the contract s"eci%icall( state! the a$e o% G. 1a(
? sccess%ll( !e#an! annl#ent o% the contractA No. Tre that the contract is )oi!able becase o% the %act that at
the ti#e o% the celebration o% the contract, G, the other contractin$ "art(, was a #inor an! sch #inorit( was 4nown to
?.
i.e. Pe!ro sol! a "iece o% lan! to his ne"hew Hintin, a #inor. One #onth later, Pe!ro !ie!. Pe!roBs heirs then
bro$ht an action to annl the sale on the $ron! that Hintin was a #inor an! there%ore withot le$al ca"acit( to
contract. I% (o are the 0!$e, wol! (o annl the saleA No. The CC in Art. 1&7> is e/"licit. Persons who are ca"able
cannot alle$e the inca"acit( o% those with who# the( contracte!. The re'isites are lac4in$, the secon! is not in the
case.
Art. 1&75. An obli$ation ha)in$ been annlle!, the contractin$ "arties shall restore to each other the thin$s which ha)e been the
sb0ect #atter o% the contract, with their %rits, an! the "rice with its interest, e/ce"t in cases "ro)i!e! b( law.
In obli$ations to ren!er ser)ice, the )ale thereo% shall be the basis %or !a#a$es. 61&3&a8
Art. 1&77. @hen the !e%ect o% the contract consists in the inca"acit( o% one o% the "arties, the inca"acitate! "erson is not obli$e!
to #a4e an( restittion e/ce"t inso%ar as he has been bene%ite! b( the thin$ or "rice recei)e! b( hi#. 61&3.8
Art. 1&75 obli$ation o% #tal restittion.
Interest re%ers to the le$al interest.
The bene%it in Art. 1&77 which obli$es the inca"acitate! "erson to #a4e restittion !oes not necessaril( "res""ose a
#aterial an! "er#anent a$#entation o% %ortne< it is s%%icient i% there has been a "r!ent an! bene%icial se b( the
inca"acitate! "erson o% the thin$ which he has recei)e!. In or!er to !eter#ine this, it is necessar( to 4now his
necessities, his social "osition as well as his !ties as a conse'ence thereo% to others.
It is clear that the "roo% o% sch bene%it is cast "on the "erson who has ca"acit(, since it is "res#e! in the absence o%
"roo% that no sch bene%it has accre! to the inca"acitate! "erson
Art. 1&77 cannot be a""lie! to cases where the inca"acitate! "erson can still retrn the thin$ which he has recei)e!.
'!LE$'I$!: Liabilit( can e)en be base! on Art. *3 an! *1
Art. 1.33. @hene)er the "erson obli$e! b( the !ecree o% annl#ent to retrn the thin$ can not !o so becase it has been lost
thro$h his %alt, he shall retrn the %rits recei)e! an! the )ale o% the thin$ at the ti#e o% the loss, with interest %ro# the sa#e
!ate. 61&3>a8
Art. 1.31. The action %or annl#ent o% contracts shall be e/tin$ishe! when the thin$ which is the ob0ect thereo% is lost thro$h
the %ra! or %alt o% the "erson who has a ri$ht to institte the "rocee!in$s.
I% the ri$ht o% action is base! "on the inca"acit( o% an( one o% the contractin$ "arties, the loss o% the thin$ shall not be an
obstacle to the sccess o% the action, nless sai! loss too4 "lace thro$h the %ra! or %alt o% the "lainti%%. 61&1.a8
Art. 1.3*. As lon$ as one o% the contractin$ "arties !oes not restore what in )irte o% the !ecree o% annl#ent he is bon! to
retrn, the other cannot be co#"elle! to co#"l( with what is inc#bent "on hi#. 61&358
The loss o% the thin$ which constittes the ob0ect o% the contract thro$h the %alt o% the "art( who# the action %or
annl#ent #a( be institte! shall not, there%ore, e/tin$ish the action %or annl#ent
The onl( !i%%erence %ro# an or!inar( action %or annl#ent is that, instea! o% bein$ co#"elle! to restore the thin$, the
!e%en!ant can onl( be co#"elle! to "a( the )ale thereo% at the ti#e o% the loss.
@here loss is !e to %alt o% "lainti%% the action %or annl#ent is e/tin$ishe!
There are three #o!es whereb( sch action #a( be e/tin$ishe!. The( are:
1. "rescri"tion
*. Rati%ication
&. Loss o% the thin$ which is the ob0ect o% the contract thro$h the %ra! or %alt o% the "erson who is entitle! to institte
the action
I% the loss was !e to the %ra! or %alt o% the "lainti%% !rin$ his inca"acit(, the e/ce"tion was a""licable.
The loss wol! not be an obstacle to the sccess o% the action.
I% the "erson obli$e! b( the !ecree o% annl#ent to retrn the thin$ cannot !o so becase it has been lost
thro$h a %ortitos e)ent, the contract can still be annlle!, bt with this !i%%erence the !e%en!ant can be hel! liable
onl( %or the )ale o% the thin$ at the ti#e o% the loss, bt withot interest thereon. The !e%en!ant, not the "lainti%%, #st
s%%er the loss becase he was still the owner o% the thin$ at the ti#e o% the loss< he shol!, there%ore "a( the )ale o%
the thin$, bt not the interest therein becase the loss was not !e to his %alt.
Accor!in$ to Cr. Tolentino, i% the "lainti%% o%%ers to "a( the )ale o% the thin$ at the ti#e o% its loss as a
sbstitte %or the thin$ itsel%, the annl#ent o% the contract wol! still be "ossible, becase, otherwise, we wol! arri)e
at the absr! conclsion that an action %or annl#ent wol! in e%%ect be e/tin$ishe! b( the loss o% the thin$ thro$h a
%ortitos e)ent.