This document discusses rescissible contracts under Philippine law. It defines a rescissible contract as one that is validly agreed upon but allows for rescission as an equitable remedy in certain cases established by law. Rescission involves restoring the parties to their pre-contract condition. Contracts can be rescinded due to lesion or damage to one party, fraud, or special provisions of law. Specific contracts that can be rescinded include those entered by guardians on behalf of wards, those agreed to in representation of absentees, contracts undertaken in fraud of creditors, and contracts related to things under litigation. The action for rescission must be commenced within four years, except for persons under guardianship or absentees. Res
This document discusses rescissible contracts under Philippine law. It defines a rescissible contract as one that is validly agreed upon but allows for rescission as an equitable remedy in certain cases established by law. Rescission involves restoring the parties to their pre-contract condition. Contracts can be rescinded due to lesion or damage to one party, fraud, or special provisions of law. Specific contracts that can be rescinded include those entered by guardians on behalf of wards, those agreed to in representation of absentees, contracts undertaken in fraud of creditors, and contracts related to things under litigation. The action for rescission must be commenced within four years, except for persons under guardianship or absentees. Res
This document discusses rescissible contracts under Philippine law. It defines a rescissible contract as one that is validly agreed upon but allows for rescission as an equitable remedy in certain cases established by law. Rescission involves restoring the parties to their pre-contract condition. Contracts can be rescinded due to lesion or damage to one party, fraud, or special provisions of law. Specific contracts that can be rescinded include those entered by guardians on behalf of wards, those agreed to in representation of absentees, contracts undertaken in fraud of creditors, and contracts related to things under litigation. The action for rescission must be commenced within four years, except for persons under guardianship or absentees. Res
approval of the litigants or of competent judicial authority;
Art. 1380. Contracts validly agreed upon may be
rescinded in the cases established by law. (1290) Rescissible Contract those validly agreed upon, all essential requisites exists and legally effective but in the case established by law, the remedy of rescission is grated in the interest of equity. Rescission equitable remedy granted by law to the contracting parties and sometimes even to third persons in order to secure reparation of damages caused hem by a valid contract, by means of the restoration of things to their condition prior to the celebration of said contract. Requisites of Rescission: 1. The contact must be validly agreed upon. 2. There must be lesion or pecuniary prejudice or damage to one of the parties or to a third person. 3. The rescission must be based upon a case especially provided by law. 4. There must be no other legal remedy to obtain reparation for damage. 5. The party asking for rescission must be able to return what he is obliged to restore by reason of the contract. 6. The object of the contract must not legally be in the possession of third persons who did not act in bad faith. 7. The period of filing the action for rescission must not have prescribed. Art. 1381. The following contracts are rescissible: (1) Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of the things which are the object thereof; (2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number; (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; (4) Those which refer to things under litigation if they have been entered into by
(5) All other contracts specially declared
by law to be subject to rescission. (1291a) Susceptible for Rescission: 1. 2. 3.
Because of lesion or prejudice
On account of fraud or bad faith. By special provisions of law.
Cases of Rescissible contracts:
1. Contracts entered into in behalf of words by reason of some incapacity. 2. Contracts agreed upon in representation of absentees the absentee must suffer a lesion by more than of the value of the property object of the contract to entitle him to the remedy of rescission. Absentee a person who disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property 3.
Contracts undertaken in fraud of creditors
with the intention to prejudice the rights of creditors. Such contracts are usually made without the knowledge of the creditors Requisites: i. There must be an existing credit prior to the contract to be rescinded, although it is not yet due and demandable later. ii. The subsequent contract made by the debtor conveys a patrimonial benefit to a third person iii. There must be fraud on the part of the debtor which may be presumed or proved iv. If the contract is by onerous title, the third person has been a party to the fraud. v. If the contract has no other legal remedy to satisfy his claim.
4.
Contracts which refer to things under
litigation to secure the payment of an existing credit of a third person against a party to a contract sought to be rescinded.
Rescission for breach of
contract Is not predicated on injury to economic interests of the party plaintiff but on the breach of faith by the defendant that violates the reciprocity between the parties.
Rescission of lesion Retaliatory in character, it being unjust that a party be held bound to fulfill his promises when the other violates his.
Art. 1382. Payments made in a state of insolvency
for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible. (1292) -
Obligation referred to are not only those that
have not yet become due and demandable. But also those which cannot legally be demanded such as natural obligations and tose that have prescribed.
Art. 1383. The action for rescission is subsidiary;
it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. (1294) Art. 1384. Rescission shall be only to the extent necessary to cover the damages caused. (n) Subsidiary Liability - Can be availed of only if the injured party proves that he has no other legal means aside from rescinding the contract to obtain satisfaction for his claim or redress for the damage caused. Art. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore. Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.
In this case, indemnity for damages may be
demanded from the person causing the loss. (1295) Mutual Restitution must return to each other the object of the contract with its fruits and the price thereof with legal interest. Status Quo Ante place the parties as far as practicable in their original situation. -
When it is no longer possible to return the
object of the contract, an indemnity for damages operates as restitution.
Rescission not allowed?
1. If the party who demands rescission cannot return what he is obliged to restore under the contract 2. If the property is legally in the possession of a third party who acted in good faith that the third party acquired and registered it in ROP unaware of the flaw in his title or mode of acquisition. Art. 1386. Rescission referred to in Nos. 1 and 2 of Article 1381 shall not take place with respect to contracts approved by the courts. (1296a) -
The law presumes that the court is acting in
the interests of the ward or absentee when it approves the contract in spite of the lesion.
Art. 1387. All contracts by virtue of which the
debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking the rescission. In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by the law of evidence. (1297a) -
Fraud is criminal in nature, it must be
proved by clear and preponderance of evidence.
Only actual creditors can ask for rescission.
Test: Does it prejudice the right of creditors? Conveyance of property by an insolvent debtor: Valid? he may still dispose of his property for a valuable consideration in good faith. - BUT he will not be permitted to alienate his property and place it in a position where it is not subject in behalf of his creditors, unless there had been received a full and dair consideration, and the transfer has been made in good faith. Art. 1388. Whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them. If there are two or more alienations, the first acquirer shall be liable first, and so on successively. (1298a) Bad faith it imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It means breach of known duty though some motive or interest or ill-ill. It partakes of the nature of fraud. Purchaser in Good Faith one who buys the property of another w/o notice that some other person has a right to, or interest in, such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other person in the property. Art. 1389. The action to claim rescission must be commenced within four years. For persons under guardianship and for absentees, the period of four years shall not begin until the termination of the former's incapacity, or until the domicile of the latter is known. (1299) Prescription Period: GR: commenced within 4 years from the date the contract was entered into. XPN: 1. 2.
Under guardianship commence from the
termination of incapacity. Absentees the time the domicile is known.
Laches bar and action for rescission or annulment
of a contract. Rescission = Action of Last Resort. - When the creditor discovers that he has no other legal remedy for the satisfaction of his claim against the debtor other than an accion pauliana to rescind the conveyance to a third person. Who may bring the action for rescission? 1. Injured party or defrauded creditor 2. Heirs, assigns, or successors in interest 3. The creditors of the above entitled to subrogation