RESCISSIBLE CONTRACTS

(Art. 1380 1389)

What are rescissible contracts?
They are contracts validly agreed upon and legally effective, but in cases of
economic injury or damage (lesion), they may be rescinded.
What is action for rescission?
An action for rescission is a remedy granted by law to injured parties, whether one
of the contracting parties or a third party, to recover from the damages (lesion)
caused by the valid contract.
Who may file for rescission? What happens if he files for rescission?
Parties who suffered economic damage or lesion (like loss, instead of profit) may
file for rescission, whether they are:
1. one of the contracting parties or a defrauded creditor; or
2. their heirs and assigns; or
3. creditor of the mentioned entitled to subrogation.
When they do file for rescission, they must file before it prescribes and they would
only be entitled to the extent necessary to cover damage suffered.
What are the requisites of rescissible contracts?
The following are the requisites of rescissible contracts:
1. Contract validly agreed upon;
2. Lesion or injury in relation to money, to one of the parties or to a third
parties;
3. Rescission must be based upon a case especially provided by law;

4. There must be no other legal means to recover from the injury;

5. Mutual restitution party asking for rescission must be able to return what
he is obliged to restore by reason of the contract;
a. Object of the contract with its fruits; and
b. Price thereof with legal interest;
6. Object must not be in the legal possession of third persons who acted in
good faith; and
7. Action for rescission done before it prescribes.
What are the types / cases of rescissible contracts?
The following may be rescinded:
1. Contracts entered into by guardians on behalf of wards, if the lesion is more
than value of the thing;
2. Contracts entered into by representatives on behalf of absentees, if the lesion
is more than value of the thing;
3. Contracts undertaken in fraud of creditors, provided that
a. There be an existing credit prior the contract, although it is not yet due
and demandable;
b. Fraud on the part of the debtor be presumed or proved; and
c. Creditor cannot recover his credit in any other manner;
4. Contracts which refer to objects under litigation;
5. Other instances, like
a. In a partition, if lesion is more than value of the thing; or
b. In a lease, if any of the contracting parties fail to comply with their
obligations; or
c. In a contract of sale, if the lack of area of real estate be at least 1/10 of
that stated; or

d. In a contract of sale, if the inferior value of the thing exceeds 1/10 of

the price agreed upon; and
e. Payments made in a state of insolvency.
When rescission may NOT be applied?
Rescission may not be applied:
1. In contracts entered into on behalf of wards or absentees, if
a. lesion is less than or equal to value of the thing; or
b. if approved by the courts; or
c. contract was not made by guardian or representative; or
d. if the damage is repaired;
2. In contracts undertaken in fraud of creditors, and there is another legal
means to recover or collect his claim;
3. When mutual restitution is no longer possible;
4. When the object of the contract is in the legal possession of a third person
who acted in good faith.
What is an example of a rescissible contract?
Lets say that G is the guardian of W, who was only 15 years old at the time. G, on
behalf of W, sells Ws car worth Php2 million for only Php1 million resulting in a
Php1 million loss.
In this instance, the contract in question is validly agreed upon, and the lesion is
the loss from selling the car.
The defect arises if the within the four years from Ws capacity (the moment he
turns 18 years old), W questions the defectiveness of this contract. He may then
file an action for rescission.

However, if W lets the four years lapse without questioning, the action for
rescission has prescribed and he may no longer file for action for rescission.

Rescissible Contracts; as to:

1. Presence of essential elements: All essential elements are present
2. Nature: Valid and binding, until rescinded
3. Cause of defect: External Defect defect is not in the contract itself, but in
the economic injury or damage it would cause to one of the contracting
parties or to third persons
4. Whether it can be ratified: No need for ratification
5. Whether it can be cured: Yes, prescription can cure the defect
6. Prescription period: action for rescission must be filed 4 years from
General rule: time of perfection;
Contracts in representation of wards: time the ward attains capacity;
Contracts in representation of absentees: time the absentee appears.
7. Who may file rescission or attack or question: injured party, whether it be
one of the contracting parties or a third person
8. Whether it may be directly attacked or collaterally attacked: Direct attack
only
Prepared by: Angelica Grace G. Calica
Sources:
Paras, Civil Code of the Philippines Annotated Volume Four
De Leon, Obligations and Contracts