Ch. 10 - Rescissible Contracts

Question 1

Enumerate kinds of defective contracts

Answer 1

1. Rescissible contracts;
2. Voidable contracts;
3. Unenforceable contracts; and
4. Void and inexistent contracts

Question 2

(Art. 1380) Contracts validly agreed upon may be

Answer 2

rescinded in the cases established by law

Question 3

What is a rescission?

Answer 3

is a remedy granted by law to contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract, even if this should be valid, by restoration of things to their condition at the moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniary damage to someone

Question 4

What is the effect of rescission

Answer 4

has the effect of “unmaking a contract, or its undoing from the beginning, and not merely its termination”

Question 5

Distinguish cancellation of contract and rescission

Answer 5

To rescind is to declare a contract void in its inception and to put an end to it as though it never were. The termination or cancellation of a contract would necessarily entail enforcement of its terms prior to the declaration of its cancellation in the same way that before a lessee is ejected under a lease contract, he has to fulfill his obligations thereunder that had accrued prior to his ejection.

Question 6

Distinguish Rescission from resolution

Answer 6

Rescission is a subsidiary action based on injury to the plaintiff’s economic interests. Resolution, on the other hand, is based on the defendant’s breach of faith, a violation of the reciprocity between the parties.

Question 7

Rescission under Art. 1191 prescribes in

Answer 7

10 years

Question 8

Rescission under Art. 1381 must be commenced within

Answer 8

4 years

Question 9

(Art. 1381) The following contracts are rescissible:

Answer 9

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 the defendant without the knowledge and approval of the litigants or of competent judicial authority;
5. All other contracts specially declared by law to be subject to rescission

Question 10

Rescissible contracts, not being void, they remain

Answer 10

legally effective until set aside in a rescissory action and may convey title

Question 11

Who is a ward?

Answer 11

A person, usually a minor, who is under a guardian’s charge or protection

Question 12

Who is an absentee?

Answer 12

A person who disappears from his domicile, his whereabouts being unknown, and without leaving an agent to administer his property.

Question 13

(Art. 1382) Are payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the same time they were effected rescissible?

Answer 13

Yes they are rescissible

Question 14

(Art. 1383) The action for rescission is subsidiary; it cannot be instituted except when

Answer 14

the party suffering damage has no other legal means to obtain reparation for the same

Question 15

What is a subsidiary remedy?

Answer 15

has been defined as “the exhaustion of all remedies by the prejudiced creditor to collect claims due him before rescission is resorted to”

Question 16

(Art. 1384) Rescission shall be only to the

Answer 16

extent necessary to cover the damages caused

Question 17

Rationale behind Art. 1384

Answer 17

This is because the purpose of rescission is to repair the damages caused

Question 18

(Art. 1385) Rescission creates the obligation to

Answer 18

return the things which were the object of the contract, together with their fruits, and the price with its interest;

Question 19

(Art. 1385) Consequently, rescission can be carried out only

Answer 19

when he who demands rescission can return whatever he may be obliged to restore

Question 20

(Art. 1385) Neither shall rescission take place when

Answer 20

the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith

Question 21

(Art. 1385) When it is no longer possible to return the object of the contract, or when it is in possession of a third party who did not act in bad faith then,

Answer 21

an indemnity for damages may be demanded from the person causing the loss and operates as restitution

Question 22

What is a mutual restitution?

Answer 22

Entails the return of the benefits that each party may have received as a result of the contract. This means bringing the parties back to their original status prior to the inception of the contract.

Question 23

(Art. 1386) Rescission referred to in Nos.1 and 2 of Article 1381 shall not take place with respect to

Answer 23

contracts approved by the courts

Question 24

(Art. 1387) All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been

Answer 24

entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation

Question 25

(Art. 1387) Alienations by onerous title are also presumed fraudulent when made by

Answer 25

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

Question 26

(Art. 1387) In addition to these presumptions, the design to defraud creditors may be proved in

Answer 26

any other manner recognized by law of evidence

Question 27

What is accion pauliana?

Answer 27

The action to rescind contracts in fraud of creditors

Question 28

The following requisites must be present for accion pauliana to occur:

Answer 28

1. The plaintiff asking for rescission has a credit prior to alienation, although demandable later;
2. The debtor has made a subsequent contract conveying a patrimonial benefit to a third person
3. The creditor has no other legal remedy to satisfy his claim;
4. The act being impugned is fraudulent; and
5. The third person who received the property conveyed, if it is by onerous title, has been an accomplice in the fraud

Question 29

Presumption of fraud is

Answer 29

not conclusive

Question 30

(Art. 1388) Whoever acquires in bad faith the things alienated in fraud of creditors, shall

Answer 30

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.

Question 31

(Art. 1388) If there are two or more alienations,

Answer 31

the first acquirer shall be liable first, and so on successively

Question 32

(Art. 1389) The action to claim rescission must be commenced within four years except for persons under guardianship which is

Answer 32

Within four years from the time of the termination of the incapacity of the ward

Question 33

(Art. 1389) The action to claim rescission must be commenced within four years except for absentees which is

Answer 33

Within four years from the time the domicile of the absentee is known