Article 1385

Rescissible Contracts
 What is 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.
 Effect of rescission
Obligation of mutual restitution

• When the court declares a contract rescinded the parties must return to each other the
object of the contract with its fruits and the price thereof with legal interest.
• The purpose of rescission is to place the parties as far as practicable in their original
situation, that is, the parties are restored to the status quo ante
• With respect to the fruits, the rules on possession govern
• Article 1385 embodies the precept in article 1398
• When it is no longer possible to return the object of the contract, an indemnity for
damages operates as restitution. The important consideration is that the indemnity for
damages should restore to the injured party what was lost
 Abrogation of contract
• When a rescission is granted, it has the effect of abrogating the contract in
all respects, or “unmaking the contract, or its undoing from the beginning,
and not merely its termination. Hence , the obligation of mutual
restitution. The party seeking rescission cannot ask performance as to
party and rescission as to remainder.
 Obligation of third person to restore
• The clause “he who demands rescission” applies to a third person. Of
course, if the third person has nothing to restore, the article does not apply.
The law does not require the impossible. Thus, where a contract is
rescinded on the ground that it has been entered into in fraud of creditors,
the plaintiff- creditor has no obligation to return anything since he has
received nothing.
 When is rescission not allowed?
• The remedy of rescission cannot be availed of if the party who demands
rescission cannot return what he is obliged to restore under the contract
• Neither shall rescission take place, if the property is legally in the possession of
a third person who acted in good faith, that is to say, he acquired the property
and registered it in the registry
• Remedy of the aggrieve party would be to demand indemnity for damages from the person
who caused the loss
• If the alienation is gratuitous and not by onerous title, the transferee cannot invoke good
faith, otherwise, he would enrich himself at the expense of the creditor
Rescission is different from mutual dissent
• Article 1385 refers to contracts that are rescissible for causes specified in articles
1381 and 1382 but it does not refer to contracts that are dissolved by mutual consent
of the parties, Rather, the mutual restoration is in consonance with the basic principle
that when an obligation has been extinguished or resolved, it is the duty of the coutry
to require the parties to surrender whatever they may have received from the other so
that they may be restored as far as practicable to their original situation
The effects of the cancellation by mutual dissent of the parties shall
be governed by their agreement or by the application of other
provisions of law and not article 1385