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Questions and Answers

What is one power that guardians have regarding their wards?

  • They can annul any contract their wards enter.
  • They can enter into contracts only with state approval.
  • They can limit their wards' ability to ratify contracts.
  • They can contract on behalf of their wards. (correct)

What is tacit ratification?

  • Implicit acceptance through actions or behaviors. (correct)
  • Signing a contract to explicitly agree.
  • A rejection of a contract to show disapproval.
  • Formal acceptance of a contract without any action.

Under what condition can a minor ratify a contract?

  • Only if the other contracting party agrees.
  • Through a legal guardian's approval.
  • When they reach the age of majority. (correct)
  • By returning all benefits received from the contract.

What is required for express ratification compared to implied ratification?

<p>Explicit agreement rather than conduct. (D)</p> Signup and view all the answers

In the case of annulment due to intimidation, who must file the action?

<p>The minor involved in the contract. (B)</p> Signup and view all the answers

Which article states that ratification may be effected by the guardian of an incapacitated person?

<p>Article 1394. (B)</p> Signup and view all the answers

What happens if a minor collects money from a contract they wish to annul?

<p>The minor loses their right to annul the contract. (A)</p> Signup and view all the answers

What does Article 1395 state about ratification and conformity?

<p>Ratification does not require the other party's consent. (B)</p> Signup and view all the answers

What is the primary purpose of rescission in a contract?

<p>To restore parties to their original situation (C)</p> Signup and view all the answers

When is rescission not possible according to the content provided?

<p>When the contract is approved by the court (A)</p> Signup and view all the answers

What obligation arises once a contract is rescinded?

<p>The obligation of mutual restitution (D)</p> Signup and view all the answers

Which of the following statements is correct regarding the fruits of the contract?

<p>The party who received the object is presumed to have enjoyed the fruits (B)</p> Signup and view all the answers

Under what condition does the obligation of a third person to restore apply?

<p>If the third person has benefited from the contract (C)</p> Signup and view all the answers

What happens if the party who received the object of the contract has used its price?

<p>They must restore the object and its value (B)</p> Signup and view all the answers

What does Article 1385 state about the land and damages caused?

<p>Only the portion equivalent to the damages needs to be returned (B)</p> Signup and view all the answers

When can a debtor who donated property be presumed to have committed fraud?

<p>When sufficient property is not reserved to pay debts (A)</p> Signup and view all the answers

What is the primary condition that must be satisfied for rescission to be granted?

<p>There must be a validly agreed upon contract. (B)</p> Signup and view all the answers

Which of the following is true about unenforceable contracts?

<p>They occupy an intermediate ground between voidable and void contracts. (A)</p> Signup and view all the answers

Which of the following must exist for one to claim rescission based on lesion or damage?

<p>There must be pecuniary prejudice or damage to a party. (A)</p> Signup and view all the answers

What is the primary difference between annulment and rescission?

<p>Annulment involves law; rescission involves equity. (B)</p> Signup and view all the answers

What is a characteristic of void or inexistent contracts?

<p>They have no legal effect at all. (B)</p> Signup and view all the answers

Which of the following is NOT a requisite of rescission?

<p>There must be a specific time limit for filing a rescission. (A)</p> Signup and view all the answers

Who can avail of rescission?

<p>Contracting parties and any affected third parties. (C)</p> Signup and view all the answers

When does the prescriptive period for annulment begin?

<p>From the time the defect of consent ceases. (C)</p> Signup and view all the answers

In which situation can rescission apply to third persons?

<p>When damages to the third person are evident. (A)</p> Signup and view all the answers

What is one implication of a voidable contract?

<p>It may be enforced under certain conditions. (A)</p> Signup and view all the answers

What requires ratification to prevent annulment?

<p>Fraud incidents. (A)</p> Signup and view all the answers

What condition must be met for contracts entered into by minors to be annulled?

<p>The minor must wait until he or she turns 22. (C)</p> Signup and view all the answers

What does rescission aim to achieve for the contracting parties?

<p>Restoration of things to their original condition. (C)</p> Signup and view all the answers

Under what condition does the prescriptive period begin when fraud is involved?

<p>From the time the fraud is discovered. (B)</p> Signup and view all the answers

What is the duration for bringing an action for annulment due to fraud?

<p>Four years. (B)</p> Signup and view all the answers

When can an incapacitated person's contract be annulled?

<p>When they regain capacity. (A)</p> Signup and view all the answers

What is restored in obligations to give between contracting parties?

<p>The things that were the subject matter of the contract, with their fruits (C)</p> Signup and view all the answers

Under what condition is the action for annulment extinguished?

<p>When the loss is through the fault or fraud of the plaintiff (A)</p> Signup and view all the answers

What basis will the value of services rendered provide?

<p>The basis for damages (B)</p> Signup and view all the answers

What must an incapacitated party do in terms of restitution?

<p>Only return what has been benefited from the thing received (D)</p> Signup and view all the answers

What is the primary condition under which rescission can be sought according to Article 1383?

<p>The injured party must show no other legal means for satisfaction. (C)</p> Signup and view all the answers

Which of the following does a party liable under a decree of annulment return?

<p>The fruits received, the value of the thing at the time of loss, and interest (C)</p> Signup and view all the answers

What does rescission create an obligation to return according to Article 1385?

<p>Only the price with its interest, alongside the things of the contract (D)</p> Signup and view all the answers

What happens if one party does not comply with their obligation to return?

<p>The other party is not compelled to comply with their obligation (D)</p> Signup and view all the answers

What is the primary aim of restitution in contractual agreements?

<p>To restore parties to their original positions before the contract (A)</p> Signup and view all the answers

Under what condition will rescission not take place if the object of the contract is in the possession of a third person?

<p>If the third party acted in good faith. (A)</p> Signup and view all the answers

In cases where loss occurs, what can be said about interest in regard to the obligation to return?

<p>Interest must be included from the time of loss (C)</p> Signup and view all the answers

When can rescission not occur despite a party demanding it?

<p>When the party cannot return what needs to be restored. (A)</p> Signup and view all the answers

What is the maximum extent to which rescission can be carried out, according to Article 1384?

<p>Only to the extent necessary to cover the damages caused. (D)</p> Signup and view all the answers

In the provided example, what was the total value of the sacks of rice sold to B?

<p>P70,000.00 (B)</p> Signup and view all the answers

According to the scenario, how much indemnity for damages can be demanded from the person causing the loss?

<p>Amount of the loss suffered due to lack of fulfillment. (C)</p> Signup and view all the answers

What must a creditor demonstrate before benefiting from rescission according to Article 1384?

<p>That they initiated the action for rescission. (A)</p> Signup and view all the answers

Flashcards

Voidable Contracts

Contracts that can be cancelled by one party if there's a defect, but are valid until cancelled.

Unenforceable Contracts

Contracts that cannot be enforced in court unless they are made valid.

Void or Inextant Contracts

Contracts that have no legal effect from the start; they are completely invalid.

Rescission

An equitable remedy to undo a contract and restore parties to their pre-contract state.

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Requisite 1 of Rescission

The contract must be validly agreed upon; without undue influence or fraud.

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Requisite 2 of Rescission

There must be a loss or damage to one party or a third party.

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Requisite 3 of Rescission

Legal grounds for rescission must exist.

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Requisite 4 of Rescission

No other appropriate legal solution exists for the harm suffered.

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Rescission (Article 1383)

A subsidiary remedy to avoid a contract if the other party is insolvent (lacks assets to pay debts). The injured party must prove no other means to receive compensation.

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Insolvency (rescission)

A state of a person who can't afford to pay their debts.

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Rescission extent

Rescission only reverses the contract enough to compensate the injured party. The entire contract does not need to be erased.

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Article 1384 Rescission

Only creditor who sued for rescission benefits from it; others can't.

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Rescission and return

Rescission obligates all parties to return the items exchanged, including interest, and fruits from those items, to the original state before the contract.

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Rescission limitations (3rd parties)

Rescission doesn't take effect when items are in the possession of a third party who isn't aware of the dispute.

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Damages for breach

If a party causes damage beyond what rescission can offer, they may be held liable for additional compensation.

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Rescission & Leision

Rescission can rectify harm sustained by minors or absent individuals under a contract. However, if the damages caused are repaired or resolved, rescission is not necessary.

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Rescission's Goal

Rescission aims to return parties to their original positions before the contract was made. This puts them back to the 'status quo ante.'

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Rescission and Fruits

When a contract is rescinded, the party who received the object must return it with any benefits (fruits) they gained from it.

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Third Party's Role

A third party who received benefits from a rescinded contract must also restore them. But if they have nothing to restore, they aren't obligated.

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Value of Rescission

If the damage caused by a contract is less than the value of the object, the rescission only applies to the portion covering the damage.

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Contract Approved by Court

A contract approved by a court for a ward or absentee cannot be rescinded, even if there's a loss, because the court's approval validates the contract.

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Gratuitous Alienation and Fraud

Contracts where someone gives away property without any exchange are presumed fraudulent if they leave the donor unable to pay their debts.

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Restitution's Purpose

The purpose of restitution in rescission is to make things fair by returning what was exchanged in the contract.

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Restitution's Components

Restitution involves returning the object of the contract and its fruits, and returning the price paid for the object with legal interest.

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Guardian's Contractual Power

Guardians, as legal representatives of minors or incapacitated individuals, have the authority to enter into contracts on their behalf.

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Ratification by Ward

When a minor reaches the age of majority and chooses to accept a contract made on their behalf, they're essentially confirming the contract's validity.

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Tacit Ratification

Ratification of a contract can be implied through the ward's actions, such as collecting the benefits of the contract.

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Ratification Requirements

Express ratification requires explicit agreement, while implied ratification occurs through actions. Both types have the same legal effect.

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Ratification in Voidable Contracts

If a contract is voidable due to factors like mistake, only the party whose consent was vitiated can ratify it.

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Ratification by Guardian

A guardian can ratify contracts made on behalf of the incapacitated person.

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Minor's Right to Annulment

A minor has the right to annul a contract made with an adult, but ratification can prevent this.

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No Consent Needed for Ratification

In the case of ratification, the other party's consent is not required for the ratification to be valid.

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What happens in obligations to give?

Both parties must return what they received in the contract, including its fruits.

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What's the basis for damages in obligations to render service?

The value of the service rendered is used to calculate damages.

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What are the rules for restitution when a party is incapacitated?

The incapacitated person only needs to return the benefits gained from the contract.

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What happens if the thing is lost through fault of the obligated party?

They must return the fruits, the value of the thing at loss, and interest.

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What's the goal of restitution in annulment?

To restore parties to their original state before the contract was made.

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What happens if one party doesn't restore their part?

The other party is not obligated to comply with their part of the contract.

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What's the rule for restitution regardless of incapacity?

Both parties must restore what they received, even if one party is incapacitated.

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What's the basis for damages in obligations to render service?

The value of the service rendered is used to calculate damages.

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Third Party's Restoration

If a third party benefited from a contract that's rescinded, they have to return those benefits. However, if they have nothing to give back, they're not obligated.

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Value-Based Rescission

If the damage caused by a contract is less than the value of the item exchanged, rescission only applies to the portion covering the damage.

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Court-Approved Contract

A contract approved by a court for someone who can't make their own decisions (like a child or incapacitated person) cannot be rescinded, because the court's approval makes it valid.

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Annulment vs. Rescission

Annulment is a legal sanction where the law prevails, while rescission is an equitable remedy where equity takes precedence.

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Who can use Annulment?

Only the parties to the contract, whether they are directly involved or have secondary responsibilities, can use annulment.

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Who can use Rescission?

Not just the contracting parties, but also third parties whose interests are affected by the contract can use rescission.

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Annulment Period

The four-year timeframe for bringing annulment begins from specific events like the discovery of fraud or the end of guardianship.

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Ratification & Annulment

Ratifying a contract prevents annulment. Ratification is confirming the contract's validity after initially being able to void it.

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Ratification & Rescission

Rescission doesn't require ratification to be effective.

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Annulment for Minors

Minors can annul contracts made during their minority (under 18), until they turn 22 after becoming an adult.

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Annulment for Incapacitated Persons

Incapacitated individuals can annul contracts made during their incapacitation once they regain their mental capacity.

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Study Notes

Defective Contracts

  • Contracts that are not perfectly valid, categorized by severity:
    • Rescissible Contracts: Least defective, valid until rescinded by court due to damage to a party or third party.
    • Voidable Contracts: Valid until annulled due to defects in consent.
    • Unenforceable Contracts: Can't be sued upon until ratified; intermediate defect.
    • Void or Inextant Contracts: Absolutely null and void, have no legal effect.

Rescissible Contracts

  • Valid contracts, but can be set aside due to damage or injury to a party or third party (e.g. creditors).
  • Examples include contracts by guardians with wards experiencing significant financial harm (lesion) exceeding one-fourth property valuation and contracts made in fraud of creditors.
  • Rescission is an equitable remedy to restore parties to pre-contract state.
  • Must meet specific legal criteria to be rescinded.

Voidable Contracts

  • Valid until annulled by court action.
  • Defects arise from issues with consent, such as:
    • Incapacity of one party (e.g., minors, insane people).
    • Vitiated consent (e.g., mistake, violence, intimidation, undue influence, fraud).
  • Voidable contracts are susceptible to ratification.

Unenforceable Contracts

  • Valid, but cannot be enforced in court unless ratified.
  • Examples include contracts entered into by someone without proper authority or representation (e.g., a person who signed a sales contract purporting to represent someone else), and contracts that do not meet the legal requirements of the Statute of Frauds.

Void/Inexistent Contracts

  • Absolutely null and void from the beginning, without legal effect.
  • Examples include contracts with illegal subject matter, grossly simulated contracts, contracts based on non-existent objects or services, and impossible contracts.
  • No ratification can make a void contract valid.
  • Action to declare inexistence never prescribes.

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