In progress - Defective Contracts

Question 1

What is a rescissible contract under Art. 1318?

Answer 1

Contracts that are validly agreed upon because all the essential elements exist and, therefore, legally effective, but in the cases established by law, the remedy of rescission is granted in the interest of equity.

Question 2

What is the defect of a rescissible contract?

Answer 2

economic/pecuniary damage or lesion

Question 3

Why is a rescissible contract considered valid?

Answer 3

Because all the essential characteristics of a contract are present

Question 4

Is rescission a principal remedy for rescissible contracts?

Answer 4

No. It is only a subsidiary remedy

If damage is repaired, there is no rescission.

Question 5

What is rescission?

Answer 5

equitable remedy granted by law to the contracting parties and sometimes even to third persons in order to secure reparation of damages caused them by a valid contract, by means of the restoration of things to their condition prior to the celebration of said contract

Question 6

What are the requisites for the availment of the remedy of rescission?

Answer 6

1. The contract must be validly agreed upon
2. There must be lesion or pecuniary damage to one of the parties or to third persons
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 the damage (last remedy)
5. The party asking for rescission must be able to return what he is obliged to restore by reason of the contract (restitution)
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 for filing the action for rescission must not have prescribed.

Question 7

What is the status of a rescissible contract?

Answer 7

Valid until rescinded

Question 8

What are the rescissible contracts provided by law?

Answer 8

1. Guardian sells property of ward who suffers lesion by more than 1/4 of the value of the thing
2. Administrator sells property of absentee who suffers lesion by more than 1/4 of the value of the thing
3. Contracts entered into in fraud of creditors (Accion Pauliana)
4. Contracts in which the object is under litigation (litis pendentia/custodia legis)
5. Payment made in state of insolvency
6. Other instances
   - Partition
   - Sale per unit

Question 9

Who are entitled to file an action for rescission?

Answer 9

• the injured person
• heirs, assigns
• creditors

Question 10

What is the extent of rescission?

Answer 10

Only to the extent necessary to cover the damage caused

Question 11

Mutual restitution
What must be returned by the parties?

Answer 11

• Object and fruits
• Price and interest

Question 12

In what instances is rescission not allowed

Answer 12

• The party demanding rescission cannot return what he ought to return
• The object is in possession of a third person in good faith
• The contract is approved by the court

Question 13

What is the remedy if the object is in possession of a third person in good faith?

Answer 13

Ask for damages from other party

Question 14

What is the liability of a purchaser in bad faith?

Answer 14

1. Return the thing
2. Pay for damages (if impossible to return)

Question 15

What is the prescriptive period for rescissible contracts?

Answer 15

GR: 4 years from the date the contract was entered into

XPN:
1. under guardianship - termination of incapacity
2. absentees - time the domicile is known