CHAPTER

VI
Resci
Contr
Article 1380
Contracts validly agreed upon
may be rescinded in the cases
established by law.

Rescissible Contracts - Those 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.

Rescission - A remedy granted by law to the contracting parties

and sometimes to third persons in order to secure reparation of
damages caused them by a valid contract.

Requisites of rescission
1. The contract must be validly agreed upon.
2. There must be lesion or pecuniary prejudice to one of the
parties or to a third person
3. The rescission must be based upon a case especially
provided by law
4. There must be no other legal remedy to obtain the
reparation for the damage
5. The party asking for rescission must be able to return
what he is obliged to restore by reason of the contract
6. The object of the contract must not legally be in the
possession of third party who did not act in bad faith
7. The period for filling the rescission must not have
prescribed

Article 1381
The following contracts are
rescissible:
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 to them;
4. Those which refer to things under
litigation of 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 especially
declared by law to be subject to
rescission.

Cases of rescissible contracts

1. Contracts entered into in behalf of wards
Ward - a person under guardianship by reason of some
incapacity
2. Contracts agreed upon in the representation of absentees
Absentee - a person who disappears from his domicile his
whereabouts being unknown, and without leaving an agent to
administer his property
3. Contracts undertaken in fraud of creditors
Requisites in order that the fraud of creditors may be a valid
ground for rescission:
a. There must be an existing credit prior to the contract
to be rescinded, although it is not yet due or demandable
b. There must be fraud on the part of the debtor which may
be presumed or proved
c. The creditor cannot recover his credit in any other
manner, it not being required that the debtor be insolvent
4. Contracts which refer to things under litigation
5. Other instances
a. A partition, judicial or extrajudicial, may also be rescinded
on account of lesion, when any one of the co-heirs received
things whose value is less by at least one-fourth than the share
to which he is entitled
b. If the lessor or the lessee should not comply
with the obligations set forth in Article 1654
(Obligation of the lessor) and Article 1657
(Obligation of the lessee), the aggrieved party
may ask for the rescission of the contract and
indemnification for damages, or only the latter,
allowing the contract to remain in force
 c. Under Article 1539, the vendee may exercise
the remedy of rescission when the lack in the area
of the real estate sold be not less than one-
tenth of that stated, or when the inferior value
of the thing sold exceeds one-tenth of that price
agreed upon
Article 1382
Payments made in a state of insolvency for
obligations to whose fulfillment the debtor
could not be compelled at the time the were
effected, are also rescissible.

Insolvent - does not have sufficient properties to meet his

obligations

Included in the obligations referred to are not only those

that have not yet become due and demandable but
also those which cannot legally be demanded such
as natural obligations and those
that have prescribed
Article 1383
The action for recission is subsidiary; it
cannot be instituted except when the party
suffering damage has no other legal means to
obtain reparation for the same.

Subsidiary - it can be availed only if the injured party proves

that he has no other legal means aside from rescinding the
contract to obtain redress for the damage caused even if the
contract is covered by Article 1381..

Article 1384
Rescission shall be only to the
extent necessary to cover
damage caused.
 Article 1385
Rescission creates the obligation to return
the things which were the object of the
contract, together with their fruits, and the
price with its interest; consequently, it can be
carried out only when he who demands
rescission can return whatever he may be
obliged to restore.
Neither shall rescission take place when the
things which are the object of the
contract are legally in the
possession of third persons who
did not
 act in bad faith.
In this case, indemnity for damages
may be demanded from the person
causing the loss.

When Recission is Not Allowed

1. The party who demands rescission cannot return what he
is obliged to restore under the contract
2. If the property is legally in the possession of a third
person who acted in good faith

Article 1386
Rescission referred to in Nos. 1 and 2 of
article 1381 shall not take place with respect
to contracts approved by the courts.
 Article 1387
All contracts by virtue of which the debtor
alienates property by gratuitous title are
presumed to have been entered in fraud of
creditors, when the donor did not reserve
sufficient property to pay all debts contracted
before the donation.
Alienations by onerous title
are also presumed fraudulent
when made by persons
against whom some
judgment has been rendered in any
instance or some writ of
attachment 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.
In addition to these
presumptions, the design to
defraud creditors may be proved in any
other manner recognized by the law of
evidence.

Prima Facie Presumptions Of Fraud In Case Of

Alienation Of Debtor
1. Alienation by gratuitous title
Fraudulent, when the donor did not reserve
sufficient property to pay all debts contracted
before donation.
 2. Alienation by onerous title
Fraudulent, when made by persons against whom
some judgement has been rendered in any instance or
some writ of attachment has been issued.

Circumstances Denominated As Badges Of Fraud

1. The fact that the consideration of the conveyance is
fictitious or inadequate;
2. A transfer is made by a debtor after suit has been begun
and while it is pending against him;
3. A sale upon credit by an insolvent debtor;
4. The transfer of all his property by a debtor especially
when he is insolvent or greatly embarrassed financially;
5. The fact that the transfer is made between father and
son, when there are present some or any of the above
circumstances;
6. The failure of the vendee to take exclusively possession of
all the property;
7. It was known to the vendee that the vendor had no
property other than that sold to him.
 Article 1388
Whoever acquires in bad faith
the things alienated in fraud of
creditors, shall 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.
If there are two or more alienations, the first
acquirer shall be liable first, and so on
successively.

Liability Of Purchaser In Bad Faith

1. Return the same if the sale is rescinded.
2. If it is impossible for him to return, he must indemnify for
damages.
 Article 1389
The action to claim rescission must be
commenced within four years.
For persons under guardianship and for
absentees, the period of four years shall not
begin until the termination of the former's
incapacity, or until the domicile of the latter is
known.

General Rule:
The action to claim rescission must be commenced
within FOUR YEARS
from the date the
contact is
entered into.
Exceptions
1. For persons under guardianship, the period shall begin
from the termination of the incapacity
2. For absentees, from the time the domicile is known.

Persons Entitled To Bring Rescission:

1. The injured party or the defrauded
creditor
2. His heirs, assigns, or successors in
interest
3. The creditors of the above entitled to
subrogation