Rescissible-Contracts for school purposes.pptx

For school purposes

1. CHAPTER 7-A Delleva , Antonio Roperez , Clarence Sampere , Danylyn

2. DEFECTIVE

3. Defective contracts are those failed to meet or partially meet the legal test of validity because they lack some essential element, or the parties thereto lack the capacity to contract, or there is a vice in the consent of one of the parties or lesion in certain case. DEFECTIVE CONTRACTS

4. Rescissible Contracts Voidable Contracts Unenforceable Contracts Void or Inexistent Contracts The defective contracts in the order of their defectiveness are as follows:

5. RECESSIBLE CONTRACTS

6. RECESSIBLE from  Latin rescindō   (“I cut back”) re- (“back”) +  scindō (“I cut”) RESCISSION To  repeal, annul, or declare void; to take (something such as a rule or contract) out of effect. 

7. Concept and Requisites of Rescission Rescission is a remedy granted by law to the contracting parties or their successors in interest or even to third persons, in order to secure reparation of damages caused by them by a contract, even if the contract is valid, by means of restoration of things to their condition prior to the celebration of the contract.

8. In order the Rescission may be availed of by a party, the elements that must concur are: a case especially provided by law; 2. Mutual restitution of what the parties have received under the contract; 3. Object of the contract must not be in the possession of a third person who acquired it in good faith and for value;

9. In order the Rescission may be availed of by a party, the elements that must concur are: 4. No other legal remedy except by rescission; and 5. Action has not prescribed.

10. Contracts that may be Rescinded Those which are entered into by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of the value of things which are the object thereof; Those agreed in representation of absentees if the latter suffer the lesion stated in the preceding number;

11. Contracts that may be Rescinded 3. Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; 4. Those which refer to things under litigation if entered into by defendant without the knowledge and approval of the litigants or competent judicial authority.

12. Contracts that may be Rescinded Payments made under a contract where the debtor is in the state insolvency for obligations to whose fulfilment, he could not be compelled at the time they were effected (Article 1382); and 6. All other contracts especially declared by law to be subject to rescission.

13. MEANING OF LESION Lesion is the damage or injury to the party asking for rescission by reason of the fact that the price is unjust or inadequate.

14. JEORGE Jeorge acquired the land belonging to Niko in amount of Php100,000 although the market price at the time of sale is Php150,000 CONTRACTS IN REPRESENTATION OF WARDS NIKO TERESA

15. NIKO JEORGE By reason of sale, Niko suffered lesion of more than one-fourth of its value. Upon reaching the age of majority He can bring an action for rescission. RESCISSION

16. NIKO If Niko is an absentee, he can file an action for rescission when he reappears. CONTRACTS IN REPRESENTATION OF ABSENTEES An Absentee is a person whose whereabouts is unknown and cannot be located in his last official residence or address .

17. Those Undertaken in Fraud of Creditors, etc. To enable the creditors to exercise the remedy of rescission, it must be proven by the prejudiced creditor that he cannot collect the claims due in any other manner.

18. Those Referring to Things in Litigation A thing is considered to be in litigation when the respondent has already received service of summons from the court taking cognizance of the case.

19. Payment Under a Contract after Insolvency Insolvency here need not be a judicially declared one, but may be under a situation where the debtor is publicly known to have defaulted in the payment of obligations due to his various creditors. Thus, if a debtor being insolvent, pays an obligation which is not yet due a creditor at the time of payment may ask the court to rescind payment.

20. Contracts Declared by Law Subject to Rescission These compromises all other contracts scattered in the Code, like judicial or extra-judicial partition where one of the heirs received a share less than one-fourth of legitimate share (Articles 1089), an unpaid seller of things (Article 1526 and 1524), and breach of reciprocal obligations under Article 1191, among others.

21. Contracts in behalf of wards or absentees approved by court not rescissible . Contracts set in these numbers entered in behalf of a minor by a guardian ad litem or by a legal representative incase of an absentee and approved by the courts, are not rescissible . This is so because intervention of the court is sufficient to protect the interest of the minors as well as those who are considered as absentees.

22. Rescission without judicial intervention. Courts have held valid however stipulation in a contract providing automatic revocation or cancellation of the contract for violation of any terms and conditions thereof without intervention of the courts.

23. Action for Rescission not a Principal Remedy The action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no other legal means of seeking redress or reparations for the damaged caused. If therefore, it is found that the debtor has other properties aside from that which is the object of the rescissible contract, rescission will not prosper for the reason that the defrauded creditor can collect in some other way by pursuing the debtor's other properties.

24. Extent of Rescission. Rescission shall be only to the extent necessary to cover damages caused. (Articles 1384) This means that partial rescission is allowed since the purpose of remission is only to repair or cover up the damages caused and to respect and preserve as much as possible the contract entered into by the parties.

25. Effects of Rescission Rescission creates the obligation to return the things which were the object of the contract, together with fruits, and the price with interest; consequently, it cannot be carried out when he who demands rescission cannot return whatever he may be obliged to restore neither shall rescission take place when things which are the object of the contract are legally in the possession of a third person who did not act in bad faith. In this case the indemnity for damages may be demanded from the person causing the loss.

26. Requisites for an Action for Rescission to Prosper In order that an action for rescission may prosper the plaintiff must be able to return what he was received by virtue of a rescissible contract together with the fruits or the price and interest, and that the object of the contract is not in the hands of a third person who has acquired the same in good faith and for value.

27. Mutual Restitution of Things Received The obligation of mutual restitution includes not only the return for the thing together with the fruits but also the price and interest.

28. Subject Matter in Possession of Purchaser in Good Faith A purchaser in good faith is one who buys the things for value, and without notice of defect of acquisition of the vendor.

29. Alienations Presumed in Fraud of Creditors All contracts by virtue of which the debtor alienates properly by gratuitous title are presumed to have been entered into in fraud if creditors, when the donor did not reserve sufficient property to pay all debts contracted before donation.

30. Alienation by Gratuitous Title Contracts involving gratuitous alienation take place when the debtor did not reserve sufficient property to pay all his debts' contracted before the donation.

31. Alienation by Onerous Title For an onerous alienation to be presumed fraudulent, it must be made, by a person against whom a judgement has been rendered, or against whom a writ of attachment has been issued by the court, and it is immaterial whether or not decision or writ of attachment was obtained by the party seeking the rescission, or refers to the property alienated as long as the alienation took place.

32. Circumstances Indicative of Fraud In considering whether or not certain transactions were fraudulent, courts have laid down certain rules by which the fraudulent character of a transaction may be determined.

33. Circumstances Indicative of Fraud The following are some of the circumstances attending sales which have been denominated by the courts as badges of frauds: The fact that consideration of a conveyance is fictitious or inadequate; 2. A transfer made by a debtor after suit has been begun and while it is pending against him; 3. A sale on credit by an insolvent debtor;

34. 4. The transfer of all or nearly all of his property by a debtor especially when he is insolvent or greatly embarrassed financially;   5. Evidence of large indebtedness or complete insolvency;   6. The fact that the transfer is made between father and son in relation to the preceding circumstances; and   7. The failure of the vendee to take exclusive possession of all the property.

35. Liability of Acquirer in Bad Faith Whoever acquired 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.

36. Concept of Bad Faith Bad faith implies a deliberate disregard of a known duty in order to get personal or economic advantage in manifest disregard of the rights of others.

37. Prescription Period for Action Rescission 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 absentee is known