rescissible contracts 2

8/3/2019 Rescissible Contracts 2

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Group 1

Almorado, Kaye

Bondoc, CandiceChua, Ralph Ray

Coronado, Porzia

Cruz, MadelDy, Darlene

Hung, Karen

Ng, Demi Sann

Ong, Cheza AlyzaSubade, Kathlene

Rescissible Contracts


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Descriptions1. This is a 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 in which they were prior to

the celebration of said contract.


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Descriptions2. Contracts are rescissible when it refers to things

under ________ .

3. Contracts are rescissible when agreed upon in

representation of _________ .

4. This is a person under guardianship by reason

of some incapacity.


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5. A debtor is _______ if he does not have sufficient

properties to meet his obligations.

6. Rescission is not a principal remedy it is only

______ .

7. Rescission shall only be to the extent of the creditor's_______ credit.

8. The entire contract need not be set aside by

rescission if the damage can be repaired or covered

by _____ rescission?

Descriptions


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Descriptions

9. Rescission creates obligation to ______the object of the contract.

10. If a contract entered into in behalf of a

ward/absentee has been approved by the______ , rescission cannot take place.


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Descriptions

11. _______ by onerous title are alsopresumed fraudulent when made by

persons against whom some judgment has

been rendered in any instance or some writof attachment has been issued.


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12. Whoever acquires in bad faith the things

alienated in fraud of creditors, shall

________ the latter for damages suffered

by them on account of the alienation.

13. The action to claim rescission must be

commence within ______ years.

Descriptions


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Rescission a remedy granted by law tothe contracting parties and sometimes even

to third persons in order to securereparation of damages caused them by avalid contract, by means of the restorationof things to their condition in which they

were prior to the celebration of saidcontract.

Article 1380


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Article 1380 Contracts validly agreed upon may berescinded in the cases established by law.

(based on 1290)

Anna owes Jack PhP100,000 due on June 5, 2009.

Jack, in turn, also owes Anna PhP100,000 due on June15, 2009. Anna did not pay Jack on June 5, 2009. ByJune 15, 2009, there will be compensationautomatically taking place, extinguishing the

contract, even if Anna and Jack have no knowledgeabout it. (Through the operation of the law andwithout any act of the parties, it is not required thatthe parties have full legal capacity to give or toreceive, as the case may be. Ibid.p.266)


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Rescissible Contracts those validly agreed upon because all the

essential elements exist and, therefore, legallyeffective

in the cases established by law, the remedy ofrescission is granted in the INTEREST OFEQUITY

no defects at all but by reason of some externalfacts, its enforcement would cause injustice

Binding Force of Rescissible Contracts

valid and enforceable subject to rescission by the court when there is

economic damage or prejudice to one of theparties or to a third person


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REQUISITES OF RESCISSION

- contract must be validly agreed upon- there must be lesion or peculiary prejudice to one of theparties or to a third person- must be based upon a case especially provided by law- there must be no other legal remedy to obtainreparation for the damage- the party asking for rescission must be able to returnwhat he is obliged to restore by reason of the contract- the object of the contract must not legally by in the

possession of third persons who did not act in bad faith- the period in filing for the action for rescission must nothave prescribed


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Article 1381Cases of Rescissible Contracts1.) Contracts entered into behalf of wards

a.) Ward a person under guardianship by reason ofsome incapacity

Ex.Those which entered into by guardians whenever the

wards whom they represent suffer lesion by more thanone-fourth of the value of the things which are the object

thereofSamantha sold her 15-year old daughters property worth

PhP100,000 for only PhP75,000. In the meantime, thecontract may not be rescinded because the lesion is notmore than . (If the property is sold less thanPhP75,000, her daughter may rescind the contract ofsale by proper action in court when she reached the ageof majority.)


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2.) Contracts agreed upon in representation of absentees

a.) Absentee

i.) a person who disappears from his domicile and

his whereabouts being unknown, and without leaving anagent to administer his property.

ii.) must suffer lesion by more than of the valueof the property object of the contract to entitle him to

remedy of rescission. Ex. Those agreed upon in representation of absentees, if

the latter suffer the lesion stated in the preceding number

Contracts agreed upon in representation of absentees.

Simon left his home without any person administeringhis properties worth PhP1,000,000. If he decides tocome back and had learned that his property were soldfor less than PhP750,000. He may take proper action in

court to rescind the contract.


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3.) Contracts undertaken in fraud of creditorsa.) there must be an existing credit prior to

the contract to be rescinded, although it isnot yet due or demandableb.) there must be fraud on the part of thedebtor which maybe presumed or proved

c.) the creditor cannot recover his credit inany other manner, it not being required thatthe debtor be insolvent

Where the fraud charged is not the one used toobtain a partys consent to a contract, it can

only be FRAUD TO CREDITORS that gives

rise to a rescission of the offending contract.


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Ex. Contracts undertaken in fraud ofcredtors.

Kimberly is obliged to Mark with anamount of PhP5,000,000 due on July 5,2009. Kimberly issued a check to Mark

worth PhP5,000,000 as payment of thedebt on July 1, 2009. Before the day ofissuance of the check, Kimberly withdrew

all of her money in her checking bankaccount. Mark cannot recover any creditin any other manner from Kimberly.


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4.) contracts which refer to things under litigation

Ex.

Those which refer to things under litigation if theyhave been entered into by the defendant without

the knowledge and approval of the litigants or of

competent judicial authority

Contacts which refer to things under litigation Allan sues Mitch for the recovery of a parcel of

land in Cavite (land: thing under litigation).During the ongoing case of the land, Mitch sold

the land to Chloe. In case Allan wins in his suitfor the recovery of the land, the sale isrescissible unless Chloe is in legal possessionof the land in good faith.


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5.) other instancesa.) A partition, judicial or extrajudicial, may

also be rescinded on account of lesion, whenany one of the coheirs received things whosevalue is less by at least than the share towhich he is entitled, considering the value of

the things at the time they were adjudicatedb.) If the lessor or the lessee should not

comply with the obligations set forth in article1654 (obligations of a lessor) and article 1657

(obligations of the lessee), the aggrieved partymay ask for the rescission of the contract andindemnification for damages, or only the latter,allowing the contract to remain in force


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Ex. Other InstancesAll other contracts

specially declared bylaw to be subject to

rescission


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Debtor is insolvent if he does not have sufficientproperties to meet his obligations.

--- It is not necessary that the debtors insolvencybe judicially declared.

Paymentsmust have been made for obligations towhose fulfillment the debtor could not be compelled atthe time they were effected

--- included in the obligations referred to are not

only those that have not yet become due anddemandable, but also--- those which cannot be legally demanded such

as natural obligations and those that have prescribed

Article 1382


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Ex.

Article 1382 Payments made in a state ofinsolvency for obligations to whose fulfillmentthe debtor could not be compelled at the time

they were effected, are also rescissible.

Joshua is obliged to Dorina. He paid Dorina hisdebt by the time that he is insolvent. Thus, Joshua

may rescind the payment to Dorina since he isinsolvent at the time of his payment.


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Article 1383

Rescission is only subsidiary it can beavailed of only if the injured party proves

that he has no other legal means asidefrom rescinding the contract to obtainredress for the damage caused

If the damage is repaired, rescissioncannot take place


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Ex.

Artcle 1383 The action for rescission issubsidiary; it cannot be instituted except

when the party suffering damage has no

other legal means to obtain reparation

for the same. Diane is selling a parcel of land to Catherine

with a value of PhP100,000. Then, she sold

the land for only PhP 20,000. Her means oflivelihood is buy and sell and due to thatsale, she got bankrupt. Thus, she canrescind the sale.


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Article 1384

The entire contract does not have to be setaside by rescission if the damage can berepaired or covered by partial rescission.

The rescission shall only be to the extent ofthe creditors unsatisfied credit.

The policy of the law is to preserve orrespect the contract, not to extinguish it


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Ex.

Article 1384 Rescission shall be only to the

extent necessary to cover the damagescaused.

Samantha, Sydneys guardian, was

authorized by the court to sell the two parcelof land of her daughter for PhP500,000 each.Samantha sold both of the land forPhP500,000. In this case, the rescission is

not for the entire contract but it can only beapplied to one parcel of land as to coverdamages suffered by Sydney.

A ti l 1385


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Article 1385

Rescission creates obligation to return the object of

the contract Object with Fruits

Price with Interest

To restore the parties to their original situation

Includes third person-unless he has nothing to restore

Fraud of creditors- plaintiff has no obligation to return,since he has received nothing

Rescission not allowed: Party who demands rescission cannot return what

he was obliged to restore

Property is legally in the possession of a third

person


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Ex. Rescission creates obligation ofmutual restitution

The court declared a contract of salebetween Sarah and Becky rescinded.Becky as the buyer of a parcel of the

land amounting to PhP500,000 isobliged to return Sarah the parcel ofland with its fruits. Sarah, on the other

hand is obliged to return to Becky thepayment of PhP500,000 with legalinterest.


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Ex. When rescission not allowed

Samantha sold to Ben the property of her daughter

Sydney (minor) amounting to Php100,000 for onlyPhp70,000. Sydney can later on rescind thecontract of sale due to lesion. If the contract isrescinded, Sydney must have the amount of

Php70,000 plus legal interest while Ben must returnthe property with its fruits. If Sydney doesnt have

the money, rescission cannot take place.

If Ben already sold the land to Diana, an innocent

buyer in good faith and who takes legal possession,rescission of the contract is also not allowed. Theonly remedy of Sydney is to file action for damagesagainst her former guardian Samantha.


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Article 1386

Contract regarding ward orabsentee has been approvedby court, rescission cannot

take place.


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Ex. Contracts approved by the courts

Samantha is authorized to sell aparcel of land amounting toPhp100,000 for only Php50,000.Once the sale happened, rescissioncannot take place even on thegrounds of lesion.


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Article 1387

Alienation by gratuitous title- fraud of creditor,if donor did not reserve sufficient property topay debts contracted before the donation

Ex. Alienation by gratuitous title Raiza donated a parcel of land to Emily

on June 15, 2009. Before that date

comes, Raiza had contracted severaldebts. With the donation to Emily, Raizabecome insolvent. (donation: fraudulentunless proved otherwise)


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Alienation by onerous title fraudulent, if:

Judgement against parties were issued

Writ of attachment is issuedEx.

Alienation by onerous title

Raiza sold a parcel of land to Emily. Before thesale, Raiza had contracted several debts.Because of that sale, she became insolvent. Thecreditors of Raiza must show that the sale

occurred resulted to unfairness to their rights. Inthis case, fraud will arise only after some

judgments have been made to Raiza that hasbeen issued against her.


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transfers are fraudulent when:

conveyance is fictitious/inadequate

made by debtor after suit has begun andpending against him

a sale on credit by insolvent debtor

the transfer of all of his property by a debtor,

especially when insolvent made between father and son, when there are

presents some/any of the above circumstances

failure of vendee to take excusive possession of

all the properties it was known to the vendee that the vendor has

no properties other than that sold to him


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Article 1388

Acquired in bad faith, the thingalienated in fraud of creditors, shall

indemnify damages, whenever, dueto any cause it is impossible to returnthem.

If there are two or moreindemnification, first acquirer shall beliable first.


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Liability of purchaser in bad faith

Ex.Sabrina sold her van to Bernadette to

avoid paying her debt to Colbie.

Bernadette knew about the purpose ofSabrina. In case of rescission,

Bernadette must return the car. In case

that the car has been destroyed,Bernadette is obliged to indemnify

damages suffered by Colbie.


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Article 1389

The action to rescission must commence withinFOUR years, however:

For wards, the period shall begin from the

termination of incapacity For absentees, from the time the domicile is

known

Person entitled to bring action:

Injured party/defrauded creditor

Heirs/assigns/successors in interest

The creditors of the above entitled to

b ti

rescissible contracts 2

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