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RESCISSIBLE

CONTRACTS

DEFINITION

AS TO KINDS

VOIDABLE CONTRACTS

UNENFORCEABLE
CONTRACTS
A contract that cannot be
enforced by a proper
action in court, unless
they are ratified.

VOID/ NON-EXISTENT
CONTRACTS
A contract that is valid
A contract that has all of
Void- refer to those where
because it contains all the the essential elements for
all of the requisites of a
essential requisites
validity are present,
contract are present, but
prescribed by law, but
although the element of
the cause, object or
which is defective because consent is vitiated either
purpose is:
of the injury or damage to by:
(1) contrary to law,
either of the contracting
(1) lack of legal capacity of
morals, good customs,
rd
parties or to 3 persons,
one of the contracting
public order or public
as a consequence of which
parties, or
policy, or
it may be rescinded by
(2) mistake, violence,
(2) contract itself is
means of a proper action
intimidation, undue
prohibited or declared
for rescission.
influence or fraud
void by law.
(vices of consent).


Inexistent- refer to those
where one or some or all
of those requisites which
are essential for the
validity of a contract are
absolutely lacking.
Include:
Include:
Include:
Include:
(1) Those which are
(1) Those where one of
(1) Those entered into in (1) Those whose cause,
entered into by
the parties is incapable
the of another person
object or purpose is
guardians whenever
of giving consent to a
by one who has:
contrary to law,
the wards whom they
contract;
(a) Been given no
morals, good
represent suffer
(2) Those where the
authority, or
customs, public order
lesion by more than
consent is vitiated by
(b) Been given no legal
or public policy
of the value of the
mistake, violence,
representation, or
(void);
things which are the
intimidation, undue
(c) Acted beyond his
(2) Those which are
object thereof;
influence or fraud.
powers.
absolutely simulated
(2) Those agreed upon in
NOTE: (1) are called the
or fictitious
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AS TO DEFECT

representation of
unauthorized
absentees, if the
contracts
latter suffer the
(2) Those that do not
lesion stated in (1);
comply with the
(3) Those undertaken in
Statute of Frauds;
fraud of creditors
(3) Those where both
when the latter
parties are incapable
cannot in any manner
of giving consent to a
collect the claims due
contract.
them (the action to
rescind a contract
that defraud creditors
is called accion
pauliana);
(4) Those which refer to
things under
lititgation 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 contract
specially declared
by law to be
subject of
rescission.
Damage/injury to either: (1) Vitiation of consent, or Contract is entered into:
(1) One of the
(2) Legal incapacity of one (1) In excess or without

(3)

(4)

(5)

(6)

(7)

(inexistent);
Those whose cause or
object did not exist at
the time of the
transaction
(inexistent);
Those whose object is
outside the
commerce of men
(void);
Those which
contemplate an
impossible service
(void);
Those where the
intention of the
parties relative to the
principal object of the
contract cannot be
ascertained (void);
Those expressly
prohibited or
declared void by law
(void).

One or some or all of the


essential requisites are

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contracting parties,
or
(2) 3rd persons.

AS TO ORIGIN OF
DEFECT

Economic damage or
lesion

AS TO DAMAGE/ Necessary.
INJURY/PREJUDICE
AS TO EFFECT
Considered valid and
enforceable until
rescinded by a competent
court.

REMEDY OR
Rescission.
CAUSE OF ACTION

of the contracting
parties.

any authority;
(2) Without compliance
with the Statute of
Frauds, or
(3) With both parties not
legally capacitated.
(1) Incapacity of one of
(1) Entered into in behalf
the contracting parties
of another person,
to give consent, or
without authority or
(2) Vitiated consent due to
in excess thereof, or
the presence of the
(2) Non-compliance with
vices of consent.
the Statute of Frauds,
or
(3) Incapacity of both
contracting parties to
give consent.
Not necessary.
Not necessary.

lacking either in fact or in


law.

Considered valid and


enforceable until annulled
by a competent court.

As a general rule,
produces no legal effects.

Annulment.

Can be considered as a
validable transaction
that is, it has no effect
now, but it may be
effective upon ratification.
However, it cannot be
enforced by a proper
action in court.

A personal defense only
when the plaintiff pursues
a specific action or
performance or complaint
for damages based on

Absence of any of the


essential requisites of a
contract.

Not necessary.

Declaration of nullity of
the contract.

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AS TO
PRESCRIPTIBILITY
OF ACTION OR
DEFENSE

breach of contract.
The action to claim
The action for annulment
The corresponding action
rescission must be
shall be brought within 4
for recovery, if there was
commenced within 4
years.
total or partial
years.
(1) in cases of
performance of the
(1) For persons under
intimidation, violence unenforceable contract
guardianship: 4-year
or undue influence: the under Article 1403, nos. 1
period shall not begin
4-year period shall
and 3, may prescribe.
until the termination of
begin from the time
the formers
the defect of the
incapacity, or until the
consent ceases.
domicile of the latter is (2) In case of mistake or
shown.
fraud,: the 4-year
(2) For absentees: 4-year
period shall start from
period shall not begin
the time of the
until the absentees
discovery of the same.
domicile is known.
(3) When the action refers
to contracts entered
into by minors or other
incapacitated persons:
the 4-year period shall
start from the time the
guardianship ceases.
Cannot be ratified.
Can be ratified.
Can be ratified.

AS TO
SUSCEPTIBILITY TO
RATIFICATION
AS TO
By prescription only.
SUSCEPTIBILITY TO
CONVALIDATION
AS TO WHO MAY (1) A contracting party,
ASSAIL THE
or
CONTRACT
(2) The contracting

(1) Ratification, or
(2) Prescription.

By ratification only.

Only by a contracting party. Only by a contracting


party.

Does not prescribe.

Cannot be ratified.
NONE. It can neither be
ratified nor can it
prescribe.
(1) A contracting party,
or
(2) A 3rd person whose

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AS TO HOW
CONTRACTS MAY
BE ASSAILED

partys
representative, or
(3) Heirs of the
contracting parties,
or
(4) Creditors by virtue of
their suppletory
action defined in art.
1177 of the CC, or
(5) A 3rd person who is
prejudiced by the
contract.
Direct action only.

interest is directly
affected.

Direct and collateral action. Direct and collateral


action.

Direct and collateral


action.

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TERM
Reformation

Rescission

DEFINITION
The remedy in equity by means of which a written instrument is made or construed so as to express or conform to
the real intention of the parties when some error or mistake has been committed.

Requisites:
(1) There must be a meeting of the minds.
(2) The true intention is not expressed in the instrument.
(3) There must be clear and convincing proof thereof (mere preponderance of evidence is insufficient).
(4) It must be brought within the proper prescriptive period.
(5) The document must not refer to a simple unconditional donation inter vivos (Art. 1366), or to wills (Art.
1366), or to a contract where the real agreement is void (Art. 1366).
The proper remedy when there has been a meeting of the minds, but there is mistake, fraud, inequitable conduct or
accident in the contract as written. Reformation does not invalidate a contract. Hence, in reforming instruments,
courts do not make another contract for the parties. They merely inquire into the intention of the parties and having
found it, reform the written instrument (not the content), in order that it may express the real intention of the
parties.

When Reformation may be asked because of mutual mistake:
(1) Under Art. 1361, the mistake must be mutual.
(2) The mistake may be unilateral under the conditions set forth in Arts. 1362 and 1363 of the CC.
(3) The mistake must be of fact- usually. Therefore, generally an error of law is not enough.

Failure to convey the true intent because of the:
(1) ignorance
(2) lack of skill
(3) bad faith of:

(1) the drafter of the instrument
(2) or the clerk
(3) or the typist.
Scaevola: A process designated to render inefficacious a contract validly entered into and normally binding, by
reason of external conditions, causing an economic prejudice to a party or to his creditors.
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Manresa: a remedy granted by law to the contracting parties and to 3rd persons in order to secure reparation of
damages the contract caused them, even if the contract be valid, by means of the restoration of things to their
condition prior to the celebration of said contract.

Supreme Court: a relief to protect one of the parties or a 3rd person from all injury and damages which the contract
may cause, to protect some preferential right.

Requisites for Rescission:
(1) There must be at the beginning either a valid or a voidable contract (not a void one) such as those mentioned
in Arts. 1381 and 1382..
(2) But there is an economic or financial prejudice to someone (a party or a 3rd person).
(3) Requires mutual restitution (Art. 1385).
(a) Plaintiff must be able to return what has been received by virtue of the rescissible contract (Exception:
prejudiced creditors).
(b) The object of the contract must not be in the legal possession of 3rd persons in good faith.
(4) There must be no other legal remedy (Art. 1383).
(5) The action must be brought within the proper prescriptive period (Art. 1389).

Two Kinds of Rescission:
(1) Art. 1380: rescission.
(2) Art. 1191: resolution.

Rescission under Art. 1380 in general:
(1) is based on lesion or fraud upon creditors.
(2) The action is instituted by either of the contracting parties or by 3rd persons.
(3) The courts cannot grant a period or term within which to comply.
(4) Non-performance by the other party is immaterial.

Rescission under Art. 1191:
(1) is based on non-performance or non-fulfillment of the obligation.
(2) The action may be instituted only by the injured party to the contract.

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(3) In some cases, the court may grant a term.


(4) Non-performance by the other party is material.

Lesion
Accion pauliana

Confirmation
Ratification


Rescission v. Mutual Dissent: the latter is an agreement of the parties to cancel their contract and mutually return
the object and the cause thereof.
Damage or injury to the party asking for rescission (generally, disparity between the price and the value)
The rescissory action to rescind contracts in fraud of creditors. The requisites before it can be brought are:
(1) there must be a creditor who became such prior to the contract sought to be rescinded (whether the party
asking for rescission is a judgment creditor already or not, is likewise immaterial).
(2) there must be an alienation made subsequent to such credit.
(3) The party alienating must be in bad faith (that is, he knew that damages would be caused his creditors
whether or not he intended to cause such damage).
(4) There must be no other remedy for the prejudiced creditor- inability to collect the claims due them.

Because of (4), this action is subsidiary. This means that if the creditor can still exhaust the debtors other properties,
this action will not be available to the creditor.

Rescission via accion pauliana v. Action to declare a contract as absolutely simulated or fictitious:
(1) R: there is real alienation but it is fraudulent.
S: there is no simulation but a mere pretense that one has been made.

(2) R: can be alleged only by creditor prior to the act.
S: can be alleged by all creditors, before or after the simulation.

(3) R: impossibility of satisfying the plaintiffs claim is required.
S: impossibility of satisfying the plaintiffs claim is not required.

(4) R: accion pauliana is an action to set aside a valid contract.
S: does not seek to set aside the simulated contract, but merely to declare its inexistence.

To cure a defect in a voidable contract (Art. 1396)
To cure the defect of lack of authority in an authorized contract (entered into by another) (Arts. 1317 and 1405)
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Requisites of Ratification (properly, confirmation of a voidable contract):
(1) The contract must be a voidable one.
(2) The person ratifying must know the reason for the contract being voidable (that is, the cause must be
known).
(3) The cause must not exist or continue to exist anymore at the time of ratification.
(4) The ratification must have been made expressly or by an act implying a waiver of the action to annul.
(5) The person ratifying must be the injured party.

Kinds of Ratification:
(1) Express (oral or written).
(2) Tacit (implied- as from conduct implying a waiver).
Acknowledgment To remedy a deficiency of proof (Art. 1405)
Badges of Fraud
(1) The fact that the consideration of the conveyance is inadequate.
(2) A transfer is made by a debtor after suit ahs been begun and while it is pending against him.
(3) A sale upon credit by an insolvent debtor.
(4) Evidence of large indebtedness or complete insolvency.
(5) The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly
embarrassed financially.
(6) The fact that the transfer is made between father and son, when there are present any of the above
circumstances.
(7) The failure of the vendee to take exclusive possession of all the property.
NOTE:
(1) This list is not exclusive.
(2) Art. 1387 is the provision on badges of fraud.
Statute of Frauds Descriptive of statutes which require certain classes of contracts to be in writing. This statute does not deprive the
parties of the right to contract with respect to the matters therein involved but merely regulates the formalities of
the contract necessary to render it enforceable. It seeks to prevent fraud and perjury in the enforcement of
obligations depending for their evidence upon the unassisted memory of witnesses by requiring certain enumerated
contracts and transactions to be evidence by a writing signed by the party to be charged.


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RESCISSION
BASIS
AS TO DEFECT
AS TO ACTION
AS TO NATURE OF ACTION
AS TO WHAT INTEREST GOVERNS
AS TO WHAT PREDOMINATES
AS TO CHARACTER OF PLAINTIFF
AS TO DAMAGE
AS TO WHEN ACTION CAN PROSPER
AS TO COMPATIBILITY WITH THE
CONTRACT
AS TO THE NECESSITY OF
RATIFICATION

Lesion.
External or intrinsic.
This action is subsidiary.
This is a remedy.
Private interest governs.
Equity predominates.
Plaintiff may be a party or a 3rd person.
Damage to the plaintiff is material.
If plaintiff is indemnified, rescission cannot
prosper.
Compatible with the perfect validity of the
contract.
To prevent rescission, ratification is not
required.

ANNULMENT
Vitiated consent or incapacity to consent.
Intrinsic (in the meeting of the minds).
This action is principal.
This is a sanction.
Public interest governs.
Law predominates.
Plaintiff must be party to the contract
(whether bound principally or subsidiarily).
Damage to the plaintiff is immaterial.
Indemnity here is no bar to the prosecution of
the action.
Defect is presupposed.
To prevent annulment, ratification is required.

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AS TO THE NATURE OF
NEGLIGENCE

AS TO THE EXISTENCE OF A
PREVIOUS OBLIGATION
AS TO THE REQUIRED
QUANTUM OF PROOF
AS TO THE DEFENSE OF A
GOOD FATHER OF A FAMILY

AS PRESUMPTION AND
BURDEN OF PROOF

CULPA CONTRACTUAL
Negligence is merely
incidental, incident to the
performance of an obligation
already existing because of a
contract.
There is a pre-existing
obligation (a contract, either
express or implied).
Preponderance of evidence.
This defense in the selection
and supervision of employees
is not a proper complete
defense (though this may
mitigate damages).

The rule followed is respondeat
superior or command
responsibility or the master
and servant rule.
As long as it is proved that
there was a contract, and that
it was not carried out, it is
presumed that the debtor is at
fault, and it is his duty to prove
that there was no negligence in
carrying out the terms of the
contract.

CULPA AQUILIANA
Negligence here is direct,
substantive, and independent.

CULPA CRIMINAL
Negligence here is direct,
substantive and independent
of a contract.

No pre-existing obligation
(except of course the duty to
be careful in all human
actuations).
Preponderance of evidence.

No pre-existing obligation
(except the duty never to harm
others).

This defense is a proper and


complete defense, insofar as
employers or guardians are
concerned).

Ordinarily, the victim has to


prove the negligence of the
defendant because his action is
based on the alleged
negligence on the part of the
defendant.

Proof of guilt beyond


reasonable doubt.
This is not a proper defense.
The employees guilt is
automatically the employers
civil guilt, if the former is
insolvent.

Accused is presumed innocent


until the contrary is proved, so
prosecution has the burden of
proving the negligence of the
accused.

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