Untitled Quiz

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What obligation arises from rescission concerning the objects of the contract?

To return only the initial payment made.

To return the objects without interest.

To maintain possession of the objects indefinitely.

To return both the objects and any fruits obtained. (correct)

In a case where a creditor seeks rescission, what condition must be met regarding the return of items?

The creditor must return only unencumbered items.

The creditor must be able to return whatever he is obliged to restore. (correct)

The creditor must ensure that the items are in perfect condition.

The creditor must return items only if they are legally owned.

If property is sold to a third party in good faith, can a creditor still rescind the transaction?

No, unless the creditor can prove bad faith.

No, because the third party's good faith protects the transaction. (correct)

Yes, because the original owner no longer has the property.

Yes, but only if the transactions were judicially approved.

Which transaction is presumed to be fraudulent towards creditors?

Donations made without reserving enough assets to pay all debts. Signup and view all the answers

What does Article 1386 state regarding contracts approved by courts?

Rescission cannot take place with respect to these contracts. Signup and view all the answers

What factors contribute to the presumption of fraud in alienations by onerous title?

Prior legal judgments or writs of attachment against the individual. Signup and view all the answers

When can the donation made by A to B be rescinded in the context of A's later debts?

If A's assets are significantly less than his liabilities post-donation. Signup and view all the answers

What is the implication of a third party possessing property in good faith when rescission is sought?

The creditor has no grounds for rescission. Signup and view all the answers

Under what condition can rescission of a donation be successful even if debts were incurred after the donation was made?

If the donation was made to avoid the payment of future debts. Signup and view all the answers

What is the implication of the presumption of fraud in onerous alienations?

It presumes that alienations are fraudulent if made against a person with any rendered judgment. Signup and view all the answers

In the scenario where A sells property to B after a judgment against him, what is the status of that sale?

The sale is presumed fraudulent. Signup and view all the answers

Which statement is accurate regarding the need for the judgment to be obtained by the party seeking rescission?

It is immaterial who obtained the judgment regarding the right to rescind. Signup and view all the answers

What happens if a donation is made without reserving enough property to pay for debts contracted before the donation?

The donation is presumed fraudulent against creditors. Signup and view all the answers

If a sale occurs after a judgment against a debtor, what must be demonstrated to support a claim of fraud?

Simply the timing of the sale in relation to the judgment establishes presumption of fraud. Signup and view all the answers

What is the significance of a writ of attachment in relation to presumed fraudulent alienations?

It provides a basis for presuming fraud in property alienations. Signup and view all the answers

Can a creditor successfully rescind a property transaction if the debtor had pending lawsuits at the time of the transfer?

No, as long as no attachment was issued before the sale. Signup and view all the answers

What must A provide when he is entitled to compensation for the loss of his house?

The full value of the house at the time of loss and interest Signup and view all the answers

Under what condition is the action for annulment extinguished?

When the object of the contract is destroyed by the party initiating the annulment Signup and view all the answers

If A destroys the house he received from B under duress, what is the outcome?

A cannot annul the contract due to his own fault Signup and view all the answers

What happens when one party fails to restore what is received due to a court decree of annulment?

Neither party can be compelled to comply with their obligations Signup and view all the answers

What can a minor do if a house sold to him is destroyed by a fortuitous event?

He can recover the price paid regardless of the event Signup and view all the answers

If loss occurs through a fortuitous event, what is the stance on restoring received property?

The innocent party cannot compel restoration to the other party Signup and view all the answers

What happens to a contract entered into by two incapacitated parties if one guardian ratifies it?

It is voidable until ratified by both guardians. Signup and view all the answers

What is a consequence of a contract being annulled without restoration from both parties?

The contract remains valid until mutual restoration is done Signup and view all the answers

What effect does an illegal sale have when one party was coerced?

The coerced party can retrieve any transferred property Signup and view all the answers

What effect does the ratification by both parents have on a contract made by their incapacitated children?

The contract is considered valid from inception. Signup and view all the answers

How are unenforceable contracts treated when it comes to third parties?

Third parties cannot assail them. Signup and view all the answers

For an electronic document to maintain its legal effect, it must be all of the following except:

Expressly signed with a digital signature. Signup and view all the answers

What must an electronic document demonstrate to be considered reliable?

It must remain unmodified except for authorized changes. Signup and view all the answers

What defines an electronic document under the Electronic Commerce Act of 2000?

It represents information transmitted electronically. Signup and view all the answers

When is an electronic document sufficient to meet a writing requirement?

When it maintains integrity and can be authenticated. Signup and view all the answers

Which of the following statements regarding the ratification of contracts is correct?

If both parents ratify, the contract is validated from inception. Signup and view all the answers

What is the effect of incapacity of both parties involved in a contract?

The contract cannot be enforced without rescission. Signup and view all the answers

What is the prescriptive period for filing a case based on incapacity due to lesion in guardianship?

No prescriptive period is provided. Signup and view all the answers

Who can assail the contract when both parties are incapacitated?

Third persons whose interests are affected. Signup and view all the answers

How can a contract suffering from incapacity be assailed?

Directly or collaterally. Signup and view all the answers

Under what condition can a contract resulting from incapacity be ratified?

Can be ratified without restrictions. Signup and view all the answers

What is true regarding the legal recognition of electronic documents?

They serve as the functional equivalent of written documents for evidentiary purposes. Signup and view all the answers

Which of the following contracts is considered void or inexistent from the beginning?

A contract that contains a term that is impossible to perform. Signup and view all the answers

What is the status of contracts that are absolutely simulated?

They are void due to lack of consent. Signup and view all the answers

According to the content, which of the following statements is true regarding the declaration of inexistence of a contract?

It does not prescribe and can be claimed at any time. Signup and view all the answers

Which of the following is NOT a characteristic of void contracts?

The intention of the parties must be clearly ascertainable. Signup and view all the answers

What happens to the defense of illegality for contracts that are void?

It cannot be asserted by third persons whose interests are not directly affected. Signup and view all the answers

What is required for a contract to be considered valid?

The cause or object must exist at the time of the transaction. Signup and view all the answers

Which of the following is a characteristic of relatively simulated contracts?

They may be enforced if the hidden contract is binding. Signup and view all the answers

Study Notes

Defective Contracts

Four kinds: rescissible, voidable, unenforceable, and void or inexistent contracts
Rescissible contracts (Chapter 6): contracts validly agreed upon but can be rescinded due to injury or damage to one of the parties or third parties (like creditors)
Voidable contracts (Chapter 7): contracts are binding until annulled by court; consent is vitiated by mistake, violence, intimidation, undue influence, or fraud; susceptible of ratification
Unenforceable contracts (Chapter 8): contracts that cannot be enforced in court; ratification is required.
Void or inexistent contracts (Chapter 9): contracts are inexistent from the beginning; cannot be ratified

Rescissible Contracts

Article 1380: Contracts can be rescinded in cases established by law (1290)
Contracts are valid due to all essential requisites but rescinded due to injury or damage to parties or third parties (like creditors)
Rescission is a legal remedy to restore parties to their original position before the contract

Requisites of Rescission

Validly agreed upon contract
Lesion (pecuniary prejudice) to one party or a third party
Based on a case specifically provided by law
No other legal remedy for reparation
Party asking for rescission must return what they're obligated to restore
Object of the contract must not legally be in possession of third party not acting in bad faith
Prescription period for filing action: 4 years

Enumeration of Rescissible Contracts

Contracts entered into by guardians when wards suffer lesion by more than 1/4 of the value of the object
Contracts agreed upon in representation of absentees suffering similar lesion
Contracts made in fraud of creditors when creditors cannot collect in another way
Contracts that refer to things under litigation entered into by the defendant without knowledge/approval of the parties involved
All other contracts specially declared by law to be subject to rescission

Meaning of Rescission

Rescission is a legal remedy to restore contracting parties or third parties to their prior position before contract

Enumeration of Rescissible Contracts (Cont'd)

Case for wards (lesion cases)
Case in representation of absentees
Case in fraud of creditors (accion pauliana)
Case for things under litigation
Other contracts declared by law to be subject to rescission

Other Badges of Fraud

Inadequate consideration
Transfer by a debtor after lawsuit
Sale upon credit by insolvent debtor
Evidence of large indebtedness/insolvency
Transfer of all/nearly all assets by debtor, especially if insolvent
Transfer between father and son if preceded by above circumstances
Lack of exclusive possession of property by the vendee

Fourth Case – Things in Litigation

A sues B for a diamond ring; B sells the ring to C without court approval, and C is not in good faith
The sale to C is rescissible if A wins the initial litigation

Premature Payments Made in a State of Insolvency

Article 1382: Payments made in a state of insolvency for obligations that the debtor could not be compelled to fulfill are rescissible

Rescission Not a Principal Remedy

Article 1383: Rescission is subsidiary means to obtain reparation; only used when other legal means are unavailable

Partial Rescission

Article 1384: Rescission limited to the extent necessary to cover damages caused

Necessity of Mutual Restitution (Cont'd)

Article 1385: Rescission obligates parties to return things, fruits and price with interest
Rescission does not occur when objects are legally in the possession of a third party without bad faith.

Necessity of Mutual Restitution

Rescission requires the parties to return the original subject matter, fruits, and price/interest, only if the person seeking rescission is able to restore what they must return
Third parties in good faith are unaffected in the rescission process.

Effect if Contracts Were Judicially Approved

Article 1386: No rescissions from approved contracts (in case 1 or 2 of Article 1381)

Presumptions of Fraud

Article 1387: Gratuitous title alienations presumed fraudulent unless sufficient assets remaining after
Transfers during ongoing court proceedings (ongoing litigation), with writ of attachment or judgment are presumed fraudulent
Similar presumption if made by a judgment debtor/attachable property owner
Additional presumptions of fraud for evidentiary purposes beyond those listed above

Presumptions of Fraud — Gratuitous Alienations

Presumption of fraud: debtor alienates property gratuitously without sufficient property remaining to satisfy existing debts before donation.
Example: A donates land to B while owing multiple debts. The donation can be presumed fraudulent due to inadequacy of remaining assets

Presumptions of Fraud— Onerous Alienations

(a) Presumed fraudulent when made to person against whom judgment or writ of attachment issued.

Presumptions of Fraud —Examples

After a court judgment, A sells property to B. The sale is presumed fraudulent if the buyer did not act in good faith.

Prescriptive Period for Rescission/Annulment

Article 1389: Four years from the date of contract EXCEPT when a guardian/absentee is involved in the circumstances
Article 1391: Four years from the time of disability, fraud or discovery of mistake on intimidation

This list is a summary and not comprehensive. Further study is recommended for full understanding of the topic.

Void or Inexistent Contracts

Article 1409: Contracts are void from the beginning -Illegal cause, object or purpose -Simulated or fictitious -Non-existent cause/object -Object outside commerce of men -Impossible service -Intention of parties cannot be determined -Expressly forbidden or declared void by law

Simulated Contracts

(a) Absolutely simulated: no actual consent, no valid contract
(b) Relatively simulated: contract exists but the intention was otherwise; hidden agreement is usually binding

Action for Declaration of Inexistence of a Contract

Article 1410: The action to determine that a contract is void does not prescribe

.### The 'Pari Delicto' Rule

-Article 1411: Both parties are equally guilty in an illegal contract; neither can compel the other to perform, and the object or price is subject to legal action.

Illegal Contract with Criminal Offense

Both parties are equally guilty; they have no legal recourse, and the contract's object/price is confiscated by the government.
If one party is guilty, the innocent party can recover what they've given, and is not obliged to perform their end of the agreement.

Exceptions to Pari Delicto

Article 1413-1419: Exceptions to the "pari delicto" rule(both parties at fault)
- Interest paid beyond legal limits
- Money/property given for an illegal purpose that is still ongoing or damage not yet incurred. Can be recovered before the purpose is complete or harm has been done
- Incapacity of one party

Effect of Illegal Terms in a Contract

-In a divisible contract; the legal terms can be enforced separately from the illegal ones

Defense of Illegality Not Generally Available to Third Persons

Article 1421: The illegality of a contract is not available to third parties unless their interests are directly affected

Persons Entitled to Raise Defense of Illegality or Nullity

Contracts bind only contracting parties, heirs, or assigns, unless a third party's interests are directly affected.

Contract That Is the Direct Result of a Previous Illegal Contract

Article 1422: A contract directly deriving from a prior unlawful contract is void and unenforceable

Electronic Commerce Act of 2000

Recognizes the validity of electronic transactions and documents

"Electronic Documents"

Information can be presented in symbolic/numerical form (digital data) and represent any right or obligation, that can be electronically created, modified and/or retrieved, with proof of its creation/transmission/preservation.

Legal Recognition of Electronic Documents

Electronic documents effectively validated and usable
- Must be completely unaltered from its original form
- Documentation proof of the document's integrity must be maintained

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.