Professional Documents
Culture Documents
Rescissible Contract: Everything You Need To Know: Types of Contracts
Rescissible Contract: Everything You Need To Know: Types of Contracts
Defect itself
Damage or prejudice
Effect
Remedy
a. Entered into by guardian whenever ward suffers damage more than ¼ of value
of property.
e. Payment by an insolvent – on debts which are not yet due; prejudices claim of
others f. Provided for by law (Arts. 1526, 1534, 1538, 1539, 1542, 1556, 1560, 1567
& 1659, NCC)
b. Plaintiff must be able to return whatever he may be obliged to return due to
rescission
c. The things must not have been passed to third persons in good faith
2. There must be fraud, or at least, the intent to commit fraud to the prejudice of the
creditor seeking rescission;
3. The creditor cannot in any legal manner collect his credit (subsidiary character of
rescission); and
4. The object of the contract must not be legally in possession of a third person in
good faith.
2. Relative – the real transaction is hidden; the contracting parties conceal their true
agreement; binds the parties to their real agreement when it does not prejudice third
persons or is not intended for any purpose contrary to law, morals, etc. If the
concealed contract is lawful, it is absolutely enforceable, provided it has all the
essential requisites: consent, object, and cause. As to third persons without notice,
the apparent contract is valid for purposes beneficial to them.
As to third persons with notice of the simulation, they acquire no better right to the
simulated contract than the original parties to the same.
What are the elements of consent?
1. Legal capacity of the contracting parties;
3. Parties’ Conformity to the object, cause, terms and condition of the contract must
be intelligent, spontaneous and free from all vices of consent; and
Note: We follow the theory of cognition and not the theory of manifestation. Under
our Civil Law, the offer & acceptance concur only when the offeror comes to know,
and not when the offeree merely manifests his acceptance.
b. to those conditions which have principally moved one or both parties to enter the
contract.
4. Undue influence – Any means employed upon a party which, under the
circumstances could not be resisted and has the effect of controlling his volition and
inducing him to give his consent to the contract, which otherwise, he would not have
entered into.
What is compensation?
It is a mode of extinguishing to the concurrent amount, the obligations of those
persons who in their own right are reciprocally debtors and creditors of each other
(Art. 1232, NCC). It involves the simultaneous balancing of two obligations in order to
extinguish them to the extent in which the amount of one is covered by that of the
other.
2. Both debts must consist in sum of money or if consumable, of the same kind or
quality;
Note: When all the requisites mentioned in Art. 1279 of the Civil Code are present,
compensation takes effect by operation of law, even without the consent or
knowledge of the creditors and debtors. When one or both debts are rescissible or
voidable, they may be compensated against each other before they are judicially
rescinded or avoided. (Art. 1284)
5. Certain obligations in favor of government (e.g. taxes, fees, duties, and others of a
similar nature)
Note: If a person should have against him several debts which are susceptible of
compensation, the rules on the application of payments shall apply to the order of the
compensation. (Art. 1289, NCC)
1. Consent;
3. Cause or consideration.
A contract is binding not only between parties but extends to the heirs, successors in
interest, and assignees of the parties, provided that the contract involves
transmissible rights by their nature, or by stipulation or by provision of law.
Exceptions:
Requisites:
b. Contracting parties must have clearly and deliberately conferred a favor upon third
person;
d. Neither of the contracting parties bears the legal representation of the third person.
Requisites:
3. Third persons coming into possession of the object of the contract creating real
rights
SPECIAL FORM OF
PAYMENT: CONDONATION
What are the requisites of condonation?
1. Must be Gratuitous;
OBLIGATIONS WITH A
PERIOD
For whose benefit is the period constituted?
General Rule:
When a period has been agreed upon for the performance or fulfillment of an
obligation, it is presumed to have been established for the benefit of both the creditor
and the debtor.
Exception:
When it appears from the tenor of the period or other circumstances that it was
established for the benefit of one of the parties.
1. When it is for the benefit of the Creditor – Creditor may demand the performance
of the obligation at any time but the debtor cannot compel him to accept payment
before the expiration of the period (e.g. “on demand”)
2. When it is for the benefit of the Debtor – Debtor may oppose any premature
demand on the part of the creditor for performance of the obligation, or if he so
desires, he may renounce the benefit of the period by performing his obligation in
advance. (Manresa)
It only relieves the contracting parties from the fulfillment of their respective obligation
during the term or period.
1. If the obligation does not fix a period, but from its nature and circumstances it can
be inferred that a period was intended by the parties
2. If the duration of the period depends upon the will of the debtor
3. In case of reciprocal obligations, when there is a just cause for fixing the period
3. Impaired security through his own acts or through fortuitous event, unless he gives
a new security equally satisfactory (if impairment is without the fault of DR, he shall
retain the right)
3. Occurrence renders it absolutely impossible for the debtor to fulfill his obligation in
a normal manner; impossibility must be absolute not partial, otherwise not force
majeure; and
4. Debtor is free from any participation in the aggravation of the injury to the creditor.
Note: The fortuitous event must not only be the proximate cause but it must also be
the only and sole cause. Contributory negligence of the debtor renders him liable
despite the fortuitous event. (Pineda, Obligations and Contracts, 2000 ed, p. 62)
General Rule:
There is no liability for loss in case of fortuitous event.
Exceptions:
1. Law
3. Stipulation
4. The debtor is guilty of dolo, malice or bad faith, has Promised the same thing to
two or more persons who does not have the same interest
5. The debtor Contributed to the loss (Tan v. Inchausti & Co., G.R. No. L-6472, Mar.
7, 1912)
CHARACTERISTICS OF
DEFAULT, DELAY OR MORA
When does delay or default arise?
Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extra-judicially demands from them the fulfilment of their obligation. In
reciprocal obligations, neither party incurs in delay if the other does not comply in a
proper manner with what is incumbent upon him. From the moment one of the parties
fulfills his obligations, delay by the other begins. (Art. 1169, NCC)
2. Debtor fails to perform his positive obligation on the date agreed upon;
3. A judicial or extra-‐judicial demand made by the creditor upon the debtor to fulfill,
perform or comply with his obligation; and
4. Failure of the debtor to comply with such demand. Note: In reciprocal obligations,
the moment one party is ready to comply with his obligation, delay by the other
begins. There is no need for demand from either party.
3. Compensatio morae – default on the part of both the debtor and creditor in
reciprocal obligations
OBLIGATIONS WITH A
PENAL CLAUSE
What is a penal clause?
Note: Proof of actual damages suffered by the creditor is not necessary in order that
the penalty may be demanded. (Art. 1228, NCC)
General Rule:
The penalty fixed by the parties is a compensation or substitute for damages in case
of breach.
Exceptions:
3. the debtor is guilty of fraud in the fulfillment of the obligation. (Art. 1126, NCC)
Note: The nullity of the penal clause does not carry with it that of the principal
obligation. The nullity of the principal obligation carries with it that of the penal
clause. (Art. 1230, NCC)
JOINT OR SOLIDARY
CHARACTER OF AN
OBLIGATION
What is the rule as regards the joint or solidary
character of an obligation?
General Rule:
When two or more creditors or two or more debtors concur in one and the same obligation, the
presumption is that the obligation is joint.
Exceptions:
4. Charge or condition is imposed upon heirs or legatees and the will expressly makes the charge or
condition in solidum (Manresa); or
Article 1381
April 2, 2019Kristia Capio