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ARTICLE 1390 2. Fraud
● By virtue of the action of rescission, that party is admitting
that the contract is valid intrinsically.
● Rescission and voidable are inconsistent with one another. (If
fail sa annulment, bawal na sa rescission, and vice versa.)
VOIDABLE CONTRACTS
When is the contract voidable?
● Incapacity of the parties
● Vitiation of consent
>> A RECISSIBLE ACTION IS MERELY SUPPLEMENTAL.
A petition for annulment is a principal action. There may not be any
other remedies that the petition needs to be exhausted. It is a direct
and principal action. However, even if it is a direct action, the validity
of a voidable contract may also be indirectly or collaterally raised.
Assuming there is a voidable contract (entered by a minor), the
minor did not file a petition to annul. The other contracting party
tries to enforce the contract. Here, the defect of incapacity of the
defendant may be put up as a defense. This would be a
counterclaim with regards to the defects of the contracts
intrinsically.
1. Direct, independent - Principal action for annulment
2. Indirect, collateral - Enforced against the incapcitated in the
voidable contract
VICES OF CONSENT
1. Mistake
3. Undue Influence
4. Force, Intimidation, violence
ARTICLE 1391
Prescription? Same as rescissible action. Must be brought within 4
years.
Time when we start the counting of the four year period (reckon)
1. If incapacitated - As long as the incapacity of the other party
of teh voidable contract is not lifted or is not capacitated, the
four year period will not commence to run.
2. If vitiated -
a. If the cause of the vice that was used was intimidation,
violence, or undue influence, then the four year period
would reckon from the time such violence, intimidation
and undue influence is gone.
b. If fraud or mistake - Counted from the time of the
discovery of the same.
INTIMIDATION, UNDUE INFLUENCE AND FORCE
It should be interrupted.
Mialhe vs Court of Appeals
ISSUE: WON the annulment of the contract was valid or already
prescribed?
DOCTRINE: Actions for annulment of contracts prescribed in four
years. If the ground for annulment is vitiation of consent by
intimidation, the 4 year period starts from the time such defect
ceases. The running of this prescriptive period cannot be
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interrupted by an extrajudicial demand made by the party whose
consent was vitiated. If the facts demonstrating the lapse of the
prescriptive period are apparent from the records, the complaint
should be dismissed.
Look at Article 1155.
FRAUD AND MISTAKE
Prescription: The law is clear that it is on the time and discovery.
When do we assume that fraud and discovery have ensued?
Presumptions:
1. Discovery is from the time of the execution of the contract if
there is an allegation that did not reflect the true intention of
the parties.
a. Plaintiff enters into contract. The intention of the
plaintiff is to mortgage the property, but the design of
the contract is the contract of sale. The true intent is not
reflected. The counting of the four year period would be
reckoned exactly on the day of the execution of the
contract.
2. If it involves contracts that would require registration. The
four year period is reckoned from the time of the registration.
Why? Because registration, particularly with govt entities in
charge of the same, is presumed to be a notice to the world.
The actual notice to the petitioners is not needed.
a. Irrespective of actual knowledge of actual registration,
the 4 yr period will commence. Why? Carantes vs CA, SC
said, discovery of the fraud must be reckoned from the
time when it is registered in the Register of Deeds.
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b. Registration is a constructive notice to the whole world.
ARTICLE 1392-1396
ARTICLE 1392 - Ratification is only necessary to cure intrinsic defects
of the contracts. In voidable contracts, the defects are intrinsic. To
flush out of its defects, ratification is necessary.
ARTICLE 1393 - HOW EFFECTED?
1. Expressly - Writing, By selling or by petitioning for the
ratification of the defect itself.
2. Tacitly - Diverse forms such as by silence, or by acts showing
adoption or approval of the contract
Whether expressed or implied, there are 3 requisites for proper
ratification.
1. There must be knowledge of the reason which renders the
contract voidable;
2. Such reason must have ceased;
3. The injured party must have executed an act which necessarily
implies or expressly the intention to waive this right to petition
for the annulment.
ARTICLE 1394 - The ratification could also be effected by guardians.
ARTICLE 1395 - The ratification does not require conformity of the
contracting party who has no right to bring action for annulment.
ARTICLE 1396 - Ratification makes the contract totally valid. In this
article, the effect of the ratification retroacts from the moment of the
perfection of the contract.
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Ex. There is a seller who enters into a contract with a buyer
which is defective. A sale of a horse, it is voidable. The sale now is
defective and because it is voidable, there could be a petition for
annulment. While the contract is voidable, bc la pa petition for
annulment. The horse gave birth to another hoursey. When it gave
birth, that was the only time the agreed party, who has the right to
file the petition for annulment, filed it. So, sino may ari nung baby
horsey? It would be in the ownership of the incpacitated.
Kapag annulled to, yung buyr, it would give back to the seller
not just the horse but the baby horse….
ARTICLE 1397 - Who may initiate the action or annulment of the
contract?
Merely tells us that only the innocent party, obliged principally or
subsidiarily may file the petition to bring an action to annul the
contract.
If the party applied (undue influence. etc) or guilty -- they cannot
initiate.
NOTE: A third party, generally cannot file a petition for annulment of
a contract which they are neither principally or subsidiarily liable.
Unlike in rescissible contracts, wherein 3rd parties can initiate.
Imagine a creditor may be a debtor. D enters a contract with a
minor. Status? Voidable.
Can C initiate action to annul the contract that D entered into with
the minor? NO. The creditor is not principally or subsidiarily liable.
Dapat RESCIND the contract.
REQUISITES TO BRING AN ACTION TO ANNUL.
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1. The plaintiff must have an interest in the contract;
2. The victim and not the party responsible for the defect is the
person who must assert the same.
EXCEPTION: A 3rd person, (Teves vs People Homeside and Housing
Corp & Kilusang Bayan Inc vs Morato) - may file a petition for
voidable contract if it is proven that the third person shall be
prejudiced with his right in respect to one of the contracting parties
and could show that the prejudice will positively result to him to
which he was not a party or no intervention.
Check: Banes vs CA
ARTICLE 1398 - EFFECT OF ANNULMENT
The parties involved must return to each other what they received by
virtue of the contract, including the fruits and the interests. If
service, the value thereof should be the basis for damages.
ARTICLE 1399 TO ARTICLE 1400
What needs to be done (return); Ano kailangan ibalik?
ARTICLE 1399 - INCAPACITY
The incapacity of the person is not obliged to make any restitution.
Exception: As he has been benefited by the thing or price received
by him.
Assuming this incapacitated person sold his car for 1million. It is
voidable, may petition to annul. Is the buyer obligated to return the
car to the incapacitated? YES.
How about the payment made? ONLY IN SO FAR IN THE AMOUNT
WHICH BENEFITTED THE INCAPACITATED.
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When considered benefitted?
1. When it was used for expenses for support.
a. Paggawa ng bahay, clothes, unusually expensive dresses,
food, education
b. If used for other purposes like gambling, illegal drugs,
etc, they will not have the obligation to return it.
ARTICLE 1400 - Read
ARTICLE 1401 TO ARTICLE 1402
Instances when the petition is no longer available; Speaks of the
petition which are not yet filed but unfortunately cannot be filed
anymore because of the circumstances that happened.
ARTICLE 1401 - ACTION NO LONGER AVAILABLE TO THE PARTY.
If the thing is lost, he can no longer initiate the action.
b. All of the consideration which was in the minor’s
possession upon reaching age of majority must be
returned.
The disposal imparts ratification (Uy-Lim vs Tan)
Ex. Seller and buyer. At the time the seller filed an action for
annulment, he was still in possession of the whole amount. S would
have the obligation to return it because he did not use it for his
benefit or not for his benefit. If for benefit merong obligation to
return.
What if upon reaching the age of majority, he uses the money for his
benefit or not, would he still have the right to the annulment
proceeding? NO MORE. Such use of the money when he reached
majority was utilized by him and was deemed an implied ratification
of the contract.

For the second paragraph, it emphasized the first paragraph.

Irrespective of whether the aggrieved party is incpacitated or not, it
would no longer be initiated.

ARTICLE 1402 - EFFECT WHERE A PARTY CANNOT RESTORE WHAT

HE IS BOUND TO RETURN

Self-explanatory.

CASES OF VOIDABLE CONTRACT BROUGHT BY INCAPACITATED

PARTIES.

1. Action of rescission is subject to 2 requisites:

a. Reasonable time after age of majority

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