tolentino digest

7/29/2019 Tolentino Digest

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RESCISSIBLE CONTRACTS

Defective Contracts Under the present Code, there are four defective contracts:

(1) The rescissible contract, which is a contract that has

caused a particular damage to one of the parties orto a third person, and which for equitable reasonsmay be set aside even if it is valid.

(2) The voidable or annullable contract, which is acontract in which the consent of one party isdefective, either because of want of capacity orbecause it is vitiated, but which contract is valid untilset aside by a competent court.

(3) The unenforceable contract, which is a contract thatfor some reason cannot be enforced, unless it isratified in the manner provided by law.

(4) The void or inexistent contract, which is an absolute

nullity and produces no effect, as if it had never beenexecuted or entered into.

Relative Ineffectiveness These are contracts which are ineffective only with respectto certain parties, but are effective as to other persons.

Examples:(1) An assignment of lease by the lessee without the

consent of the lessor is ineffective only asregards the lessor;

(2) The transfer of a debt by the debtor to another,without the consent of the creditor, is ineffective

as to the creditor;(3) The payment by a debtor to his creditor after the

credit has been garnished or attached by a thirdperson, is ineffective as to the latter.

A relatively ineffective contract is distinguished from thevoidable contract in that its ineffectiveness, with respect tothe party concerned, is produced ipso jure, while a voidablecontract does not become inoperative unless an action toannul it is instituted and allowed. It differs from the void orinexistent contract, in that the ineffectiveness of the latter is

absolute, because it cannot be ratified, while the relativeineffective contract can be made completely effective bythe consent of the person as to whom it is ineffective, or bythe cessation of the impediment which prevents itscomplete effectiveness.

Art. 1380

Concept of Rescission Rescission is a remedy granted by law to the contractingparties and even to third persons, to secure the reparationof damages caused to them by a contract, even if thisshould be valid, by means of the restoration of things priorto the celebration of said contract.

Nature of Contract The present article means that even if a contract is valid, itcan be rescinded, but does not limit rescission to valid

contracts. Rescission is perfectly compatible with thevalidity of the contract, but it does not require such validityas an essential condition. Hence, a voidable contract mayalso be rescinded.

Rescission in Reciprocal Obligations Article 1991 provides that the power to rescind obligationsis deemed implied in reciprocal ones, whenever one of theobligors does not comply with what is incumbent upon him.The effect of such rescission of the obligation are providedin article 1190. That rescission of reciprocal obligations ISNOT identical to rescission of contracts.

They have some similarities: (1) both presuppose contractsvalidly entered into and existing (this distinguishesrescission from annulment, in which there is a defect whichvitiates the contract), and (2) both require mutual restitutionwhen declared proper.

They differ, however, in the following respects:(1) Rescission under article 1991 may be demanded only

by a party to the contract, while rescission under this


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chapter may be demanded by a third partyprejudiced by the contract.

(2) Rescission under article 1191 may be denied by thecourt when there is sufficient reason to justifyextension of time to the defendant in which to

perform, while such reason does not affect the rightto ask for rescission under this chapter.

(3) Non-performance is the only ground for the right torescission under article 1191, while there are variousreasons of equity provided as grounds for rescissionunder this chapter.

(4) Rescission under article 1191 applies only toreciprocal obligations where one party has notperformed, while rescission under this chapterapplies whether the contract produces unilateral orreciprocal obligations and even when the contracthas been fully fulfilled.

Rescission and Mutual Dissent Rescission should also be clearly distinguished from anagreement of the parties to cancel their contract andmutually return the object and cause thereof. Courts havesometimes loosely called this act of the parties asrescission, although it is not properly so.

Requisites of Rescission (1) The contract must be a rescissible contract, such as

those mentioned in articles 1381 and 1382.(2) The party asking for rescission must have NO OTHER

LEGAL means to obtain reparation for the damagedsuffered by him (article 1383).

(3) The person demanding rescission must be able toreturn whatever he may be obliged to restore ifrescission is granted (article 1385).

(4) The things which are the object of the contract mustnot have passed legally to the possession of a thirdperson acting in good faith (article 1385).

(5) The action for rescission must be brought within theprescriptive period of four years (article 1389).

Direct Proceedings to Rescind Rescindible contracts are not void, and until set aside in arescissory action they are legally effective, convey title, andcannot be attacked collaterally upon the grounds forrescission.

Art. 1381

Rescission on Legal Grounds A valid contract can be rescinded ONLY FOR LEGAL CAUSE.

E.g. where the transfer and assignment by thedefendants to their brothers of a sugar cane mill wasineffective and invalid because of the objection oftheir father who was a co-owner thereof, thesubsequent sale by the defendants to the plaintiff ofthe same mill in good faith and at the lattersinsistent requests and evidenced by a documentacknowledged before a notary public CANNOT BE

RESCINDED except on grounds provided for by law.

Contracts with Lesion Under paragraphs 1 and 2 of this article, contracts enteredinto by guardians for their wards, or by trustees oradministrators for the absentees represented by them, arerescissible if the party represented suffers lesion by morethan one-fourth of the value of the things which are theobjects of the contract.

Lesion is the injury which one of the parties suffers byvirtue of a contract which is disadvantageous for him. To

give rise to rescission, the lesion MUST HAVE BEEN KNOWNor COULD HAVE BEEN KNOWN at the time of making thecontract, and not due to the circumstances subsequentthereto or unknown to the parties.

The idea is to establish parity between the value ofthe thing and its price, so that if the price is less thanthe true value of the thing at the time of perfectionof the contract, there is a lesion.

Our Code admits the principle of lesion only inspecial cases, such as those provided in the present


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article, in article 1098 on partition of inheritance, andin articles 1539 and 1542 on sales.

Contracts of Guardians GR: When a guardian enters into a contract, involving the

disposition of the wards property, he must secure theapproval of the court.

A guardian is authorized only to manage the estateof his ward; hence he has no power to dispose of anyportion thereof without approval of the court.

He cannot, without judicial approval, enter into anycontract which would be more than a mere act ofadministration.

In case, of SALE, MORTGAGE, or OTHERENCUMBRANCE of real estate, the requisites,procedure, and court approval, provided for by theRules of Court, are indispensable.

Hence, if such contracts of disposition ARE NOTapproved by the court, they are UNENFORCEABLEunder paragraph 1 of article 1403 of the C

ode,irrespective of whether there is lesion or not. Theyare not rescissible.

What contracts, then, entered into by the guardian for hiswar are rescissible UNDER THE PRESENT ARTICLE? The lawhere must be limited to contracts which constitute mereACTS OF ADMINISTRATION.

E.g. the purchase of equipment for the cultivation oflands belonging to the ward

These contracts would not require court approval, becausethey are made in the ordinary course of the management ofthe estate of the ward. If the required lesion exists, they arerescissible.

XPN: But even if such lesion exists, the contractcannot be rescinded, IF THE GUARDIAN has securedthe approval of the guardianship court for suchcontract (article 1386).

Contracts for Absentees The powers and duties of a legal representative of anabsentee, appointed by the court, are the same as those ofguardians (article 382). Therefore, the principles discussedin relation to contracts b guardians apply to contracts by the

representatives or trustees for the estate of absentees.

Contracts in Fraud of Creditors These are contracts executed with the intention to prejudicethe rights of creditors, and should not be confused withthose entered into without such intention, even if, as aconsequence thereof, some particular damage may becaused to a creditor; the existence of the intention toprejudice creditors should be determined, either by thepresumption established by article 1387 or by the proofspresented in the trial of the case.

Accion Pauliana and Simulation The rescissory action to set aside contracts in fraud ofcreditors is known as accion pauliana. It differs from anaction to declare a contract as absolutely simulated orfictitious on the following points:

(1) In the case of rescission, there is a REALalienation, but it is fraudulent; in the case ofsimulation, there is in fact no alienation but amere pretense that one has been made.

(2) The former can be alleged only by creditors priorto the act; the latter by all creditors, before orafter the simulation.

(3) Impossibility of satisfying the plaintiffs claim isrequired in the first; it is not required in the latter.

(4) The accion pauliana is an action to set aside avalid contract; while an action to declaresimulation does not seek to set aside thesimulated contract, but merely to declare itsinexistence.

Requisites for Rescission The following are necessary in order that a contract may berescinded as one made in fraud of creditors:


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(1) That the plaintiff asking for rescission has a creditprior to the alienation, although demandable later;

(2) That the debtor has made a subsequent contractconveying a patrimonial benefit to a third person;

(3) That the creditor has no other legal remedy to satisfy

his claim, but would benefit by the rescission of theconveyance to the third person;(4) That the act being impugned is fraudulent; and(5) That the third person who received the property

conveyed, if it is by ONEROUS title, has been anACCOMPLICE in the fraud.

Existence of Credit Only creditors can ask for the rescission of the contract, andthe mere fact that a person filed a suit against the debtorand secured an attachment is not sufficient evidence thatthe latter owes him anything.

Priority of Credit Rescission requires the existence of creditors AT THE TIMEOF THE FRAUDULENT ALIENATION, and this must be provedas one of the basis of the judicial pronouncement settingaside the contract; without prior existing debts, there can beneither injury nor fraud. The credit must be existing at thetime of the fraudulent alienation, even if it is not yet due.But at the time the accion pauliana is brought, the creditmust already be due.

Therefore, credits with suspensive term or conditionare excluded, because the accion pauliana

presupposes a judgement and unsatisfied execution,which cannot exist when the debt is not yetdemandable at the time the rescissory action isbrought.

Note: Rescission is a subsidiary action, whichpresupposes that the creditor has exhausted theproperty of the debtor, which is impossible in creditswhich cannot be enforced because of the term orcondition.

While it is necessary that the credit of the plaintiff in theaccion pauliana must be prior to the fraudulent alienation,the date of the judgement enforcing it is immaterial. Even ifthe judgement be subsequent to the alienation, it is merelydeclaratory, with retroactive effect to the date when the

credit was constituted.

XPN Accion pauliana may be availed of even when the alienationis prior to the credit, when the debtor purposely and in badfaith deprives himself of the ability to meet theconsequences of obligations he intends to incur in thefuture. The alienation can be rescinded if it was madeprecisely in view of such future obligation and for thepurpose of depriving in advance the creditor of the guarantyon which he could have relied.

Furthermore, there are parties who may appear to havebecome creditors after the alienation, but who may beconsidered as having a prior right and entitled to the accionpauliana.

(1) Those whose claims were acknowledged by thedebtor after the alienation, but the origin of whichantedated the alienation; the recognition doesnot give rise to the credit, but merely confirms itsexistence.

E.g. claims for damages arising before thealienation, but acknowledged by the debtoronly after the alienation.

(2) Those who become subrogated, after thealienation, in the rights of creditors whose creditswere prior to the alienation.

Creditors Included The remedy of rescission is available to all creditors whowere already such at the time of the fraudulent alienation,when they cannot collect what is due them.

E.g. Where a sale of a shop and its contents is madeby a debtor eleven days AFTER A JUDGEMENT


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against him has become final, said sale is presumedto have been effected in fraud, not only of thejudgement creditor, but also of other legitimatecreditors by virtue of debts owing long before thesaid sale; and although these latter creditors did not

obtain A JUDGEMENT until a couple of months afterthe sale, it is indisputable that they have beendefrauded by such sale.

Even secured creditors or lienholders are entitled tothe accion pauliana.

Fraudulent Conveyance It must be shown that the conveyance was fraudulent orwith intent to prejudice creditors of the party making theconveyance.

The fraud may be established by presumption, under

article 1387, or from the whole of the evidence,independently of such presumption.

PRESUMPTION: Even if there are circumstancesgiving rise to the presumption of fraud, if suchpresumption is overcome by sufficient evidence, thecreditor must prove facts showing actual fraudulentintent on the part of the debtor.

EVIDENCE: If the case is not one for which the lawestablishes a presumption of fraud, the creditorseeking the rescission of the contract must prove bycompetent evidence the existence of such fraud.

Without such proof of fraudulent intent, the contractCANNOT be rescinded.

Test of Fraud In determining whether or not a certain conveyance isfraudulent, the question in every case is whether theconveyance was a bona fide transaction or a trick andcontrivance to defeat creditors, or whether it conserves tothe debtor a special right.

It is not sufficient that it is founded on goodconsideration or is made with bona fide intent; itmust have both elements.

Test as to whether or not a conveyance is fraudulentis, does It prejudice the rights of creditors?

The fraud that justifies the accion pauliana is notcharacterized by the intention to injure the creditor, but bythe knowledge that damage would be inflicted. Thisknowledge exists when the debtor knows that his propertycannot be alienated without producing evident injury to hiscreditors with existing claims, whether they be due or notyet due.

As to Transferee As to the transferee, a distinction is made between thosewho acquire by onerous title and those by gratuitous title.

When the alienation is gratuitous, the good faith of thetransferee does not protect him, because he gave nothingand so he is not prejudiced by the rescission. But if thealienation is by onerous title, the transferee must be a partyto the fraud; if he acts in good faith, there can be norescission, because having given something, his positionwould be similar to that of the creditor, and being already inpossession his acquisition will be respected.

No Other Remedy In order that rescission of a contract made in fraud ofcreditors can be decreed, it is necessary that the

complaining creditors must prove that they cannot recoverin any other manner what is due them.

The action for rescission is essentially subsidiary.

The alienation must have been prejudicial to thecreditor, it must have had the effect of making thedebtor insolvent, having diminished his property tosuch an extent that he cannot pay the debt.

Creditors Benefitted


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GR: The rescission should benefit only the creditor whoobtained the rescission, because the rescission is to repairthe injury caused to him by the fraudulent alienation (article1384).

XPN: Balance

But there may be other creditors who could alsobring (it is not necessary that they also brought anaction, it is sufficient that they could bring theaction) the accion pauliana; they should be given thebenefit of rescission, instead of requiring them tobring other rescissory actions, if a balance is leftafter satisfying the claim of the creditor who broughtthe action.

However, creditors who became such onlyafter the fraudulent alienation, and whothemselves could not have asked forrescission, cannot benefit from the rescission.

Contracts on Things in Litigation The fourth paragraph of this article refers to a contr

actexecuted by the defendant in a suit involving the ownershipor possession of a thing, when such contract is madewithout the knowledge and approval of the plaintiff or thecourt.

E.g. Where X has brought an action to recoverpossession of a piece of land from Y, and during thependency of the action Y sells the land to Z, the saleis rescissible and may be set aside at the instance ofX when he obtains a judgement in his favor in his

action against Y.

As in the case of a contract in fraud of creditors, the remedyof rescission in this case is given to a third person who is nota party to the contract (in the example given above, theparties to the contract is Y and Z, X is a third party). Butwhile in the rescission of a contract in fraud of creditors apersonal right is protected by giving it the guaranty of thedebtors property, in the rescission of a contract on things inlitigation a real right (because plaintiff is asserting

OWNERSHIP over the thing in litigation) is rendered effectivewith respect to a particular property.

Right of Transferee Where the claim of the plaintiff in the pending litigation has

(1) not been registered, and there is (2) nothing in the landregistry or records showing any legal obstacles to thetransfer, the transferee of a property in litigation, who (3)acquires the same in good faith and (4) for valuableconsideration, (5) without knowledge or notice of thelitigation or claim of the plaintiff, cannot be deprived of suchproperty by a rescissory action. The good faith of thetransferee protects him, and rescission will not lie.

But where the transferee knew of the claim ofthe plaintiff, either actually or constructivelythrough the registry, he acts in bad faith, andthe transfer can be resincded.

If the transfer is gratuitous, the transferee loses nothing bythe rescission, and the contract may be rescinded even if heacted in good faith.

Art. 1382

Payment When Insolvent When a debtor transfers property to a creditor allegedly inpayment of a debt which has not yet matured, at a timewhen the debtor is insolvent, and when the consideration forthe transfer is grossly inadequate, compared to the actualvalue of the property transferred, the transfer is fraudulent

and may be set aside by creditors prejudiced thereby. But although the consideration for a sale was

a preexisting debt, if the debt was due andowing and enforceable at the time the deed ofsale was made, the conveyance will not fallunder the terms of this article.

The insolvency referred to in this article is insolvency in fact,not requiring any judicial proceeding on insolvency.(Creditor can rescind payment made by merely proving that


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the debtor did not have properties with which to satisfy hiscreditor except that which was given in payment insolvency in fact, need not institute any judicial proceedingto declare debtor insolvent or to obtain a judgement orexecution)

Art. 1383

No Other Remedy The plaintiff asking for rescission must prove that he has noother legal means to obtain reparation. The action forrescission is but a subsidiary remedy, available only whenthe aggrieved party has no other legal means to obtainreparation for damages suffered.

Art. 1384

Extent of Rescission The rescission is only in favor of the plaintiff creditor; not of

all creditors. The extent of the revocation is only to theamount of the prejudice suffered by the creditor. As to theexcess, the alienation is maintained.

If the claim of the creditor is less than thevalue of the thing fraudulently alienated, theexcess remains with the transferee, even if hehad acted in bad faith, because the alienationis valid.

Under the present article, only the creditor who brought theaction can benefit from the rescission, and only to theextent of his unsatisfied credit.

Who May Bring Action The action for rescission may be instituted by (1) the personwho is injured by the rescissible contract, such as the wardor absentee in the case of lesion, the creditors prejudiced bya fraudulent alienation, and the plaintiff in a case where athing in litigation is alienated by the defendant; (2) the heirsof these persons; and (3) their creditors by virtue of theright granted by article 1177.

The right of an heir of the injured part to bring the action forrescission is clear. But where a person has made afraudulent alienation for the purpose of depriving hiscompulsory heir of his legitime, can the latter institute therescissory action? He may do so after the death of the

debtor, not as representative of the later, but as a creditorwith respect to the legitime.

Art. 1385

Mtutual Restitution The only possible application of the rule that the partyseeking rescission must offer to restore that which he hasreceived from the other, is in contracts executed byguardians or administrators under Nos. 1 and 2, article1381.

Transfer to Third Person

The acquisition by a third person is an obstacle to theefficaciousness of the action for rescission, where thefollowing two circumstances are present: (1) that such thirdperson is in lawful possession of the realty, that is to say, heis protected by the law against said action by theregistration of the transfer to him in the registry; and (2)that he did not act in bad faith. Thus, a valid transfer to athird person who acquires the property in good faith issufficient to defeat the action for rescission. But if the thirdperson acted in bad faith and he cannot return the thingupon the rescission of the contract, he will be liable for thevalue of the property to the party entitled to the rescission.

Right of Transferee The right of the transferee to retain the propertyfraudulently alienated by a debtor, depends upon the natureof the transfer and the complicity of the former in the fraud.

If the transfer is gratuitous (nature), the creditor will have abetter right than the transferee who was given nothing andwho would unjustly be enriched at the expense of thecreditor if the transfer were upheld. The rescission will,therefore, be allowed, irrespective of the good of bad faith


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(complicity) of the transferee. But if the transfer was byonerous title (nature), the transferee in good faith(complicity) is protected.

The transferee who acquired ownership mustbe maintained in his rights. As between two

persons who both stand to suffer loss, thepossessor of the property should be preferredin that possession, the OWNERSHIP havingbeen transferred by delivery.

To permit rescission when the alienation is by onerous title,the transferee must be a party to the fraud (complicity); thatis, he must have knowledge that the transfer to him wouldprejudice existing creditors of the transferor.

Transferee in Good Faith The transferee in good faith to whom the thing has been

alienated gratuitously, is obliged to restore the thing,because nobody is allowed to enrich himself at the expenseof another.

But being a possessor in good faith, he is notobliged to pay the fruits received by him

He is entitled to reimbursement for necessaryand useful expenses incurred on the thing

He returns the thing in the condition that itmay be found; he is not liable for losses ordeteriorations (XPN: he has acted withfraudulent intent or negligence after judicialsummons)

Transferee in Bad Faith The transferee in bad faith is not entitled to indemnity fordamages from the debtor, in the event that rescission isdecreed. But can the transferee in bad faith at least recoverwhat he has paid to the debtor?

If the price exists in the patrimony of the debtor, ascontemplated by the Roman rule, then the accionpauliana would not lie, because then there would stillbe available property in the possession of the debtor.But on the assumption that the debtor is already

insolvent, which is a prerequisite for the action(accion pauliana), it is clear that there can be noreimbursement.

Right to Damages

When the contract cannot be rescinded, because the thinghas been acquired in good faith by a third person, the partywho caused the loss shall be liable for damages. This wouldinclude the guardian of minors, the representative oradministrator of absentees, the transferee in bad faith ofthings fraudulently alienated by a debtor, or the defendantwho has transferred the thing in litigation, in the propercases.

Art. 1386

Art. 1387

Fraud Presumed

In the absence of satisfactory evidence to the contrary, thealienation was held fraudulent because it was made AFTERA JUDGEMENT had been rendered against the debtor makingthe alienation. This presumption, however, does not applywhere the alienation of property was MADE BEFORE THEJUDGEMENT against the transferor was rendered.

To raise the presumption of fraud in case ofattachment, it is enough that it be ISSUED. Anyalienation after such issuance of an attachment,even if made before service or execution of suchattachment, will be presumed fraudulent.

Rebuttal of Presumption The presumption of fraud established by this article is notconclusive, and may be rebutted by satisfactory andconvincing evidence.

It is necessary to establish affirmatively that theconveyance was made in good faith and for asufficient and valuable consideration. Proof of thesetwo circumstances is sufficient to negative theexistence of fraud.


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When the presumption of fraud has been satisfactorilyoverthrown, it is incumbent upon the party asking forrescission to prove by sufficient evidence that there wasactual mala fides in the alienation; otherwise, the contractwill not be rescinded.

Effect of Fraud The existence of fraud, whether presumed or proved, doesnot necessarily make the alienation rescissible. Fraud is onlyone of the requisites for the accion pauliana. And even if thedebtor who made the alienation acted fraudulently, if thetransferee acquired the thing in good faith and for valuableconsideration, rescission will not be allowed.

Art. 1388

Subsequent Transfers If the first transferee acquired the thing in good faith, he is

not liable; in such case, the thing is considered to havedefinitely left the patrimony of the debtor and beyond thereach of the creditor (article 1385 (2)). Hence, thesubsequent transferee, even if he knows that the firsttransfer was fraudulent on the part of the debtor, can nolonger be held liable.

XPN: the debtor and such subsequent transferee hadconnived to make the first transferee as a mereinnocent intermediary in which case the secondtransferee would still be liable.

If the first transferee, however, acted in bad faith, and then

he alienates the property to another, the rescissiblecharacter of the second alienation depends upon how thesubsequent transferee acquired the thing.

If the second transferee acted in good faith, thetransfer to him cannot be rescinded, and since t:heproperty cannot be returned, the first transferee willhave to indemnify for damages; the subsequenttransferee is not liable for damages.

But if the second transferee also acts in bad faith, hecan be required to return the property; the first

transferee cannot be held liable for damages wheresuch return is possible. But if the property cannot bereturned, the transferees shall be successively liablefor damages.

Note: The same rule applies where the subsequent

transferee, although acting in good faith, received theproperty gratuitously.

Bad Faith of Transferee In order that there be bad faith on the part of the transferee,it is not necessary that he should have connived with thetransferor to defraud the latters creditors. It is enough thatthe transferee knows of the intention of the transferor todefraud creditors.

If the conditions of the sale, and othercircumstances, should awaken suspicion on the partof the vendee, but he does not make an inquiry to

verify the fraud, then he will be charged withknowledge thereof.

Art. 1389

Minority of Party A minor who is a party to a contract of sale must bring theaction for rescission within four years after attaining the ageof majority, because under the present article the claim forrescission prescribes in four years from removal of onesincapacity.

VOIDABLE CONTRACTS

Concept of Voidable Contracts Voidable or annullable contracts are existent, valid, andbinding, although they can be annulled because of want ofcapacity or vitiated consent of one of the parties; but beforeannulment, they are effective and obligatory between theparties. Hence, it is valid until it is set aside and its validitymay be assailed only in an action for that purpose. They canbe confirmed or ratified.

Incapacity to Consent


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The capacity of a party is not a requisite sine-qua non of acontract; its want is only a ground for annulment. The failureto incorporate the idea in our Code is a serious defect. Whocan reasonably maintain the existence of a contract enteredinto by a five year-old child?

Annulment Obtained The defendant who seeks to have the contract annulled,must ask for the annulment of the contract; this is done, notby special or affirmative defense, but by counterclaim whichasks for positive action of the court to set aside thecontract. It will not be enough for the court to declare thatthe contract is voidable and relieve the defendant of itseffects; it must annul or set aside the contract and ordermutual restitution in accordance with article 1398.

In this respect, the voidable contract differs from the void

contract. In the latter, the court merely declares thecontract as void and inexistent, which is its condition fromthe very beginning, and therefore the attack against itsvalidity can be made collaterally or indirectly. But in theformer (voidable contract), the court has first to set asideand render ineffective by its judgement the contract whichtheretofore is valid and producing legal effect, before thedefendant can be exempt from compliance therewith;hence, the attack against its validity must be directly madein an action or in a counterclaim for that purpose, with theconsequences flowing from the declaration of nullity.

Art. 1391Prescription of Nullity Extinctive prescription applies, not only to the action forannulment, but also to the defense of nullity. Hence, if theperiod of prescription has already expired, the nullity of thecontract can no longer be set up as a defense to an actionto enforce the same.

After the action has prescribed, the contract can no longerbe set aside. The action prescribes in four years.

Application of Period The period of prescription provided in this article, such asthe four year limitation in case of fraud, applies to theparties to the contract but not to third persons.

Registered Documents Discovery of fraud must be reckoned to have taken placefrom the time the document was registered in the office ofthe register of deeds, for the familiar rule is that registrationis a notice to the whole world.

Art. 1392

Ratification and Acknowledgement Confirmation, or ratification as it is now called, is that act ormeans bu which efficacy is given to a contract or anobligation which suffers from a vice of curable nullity. It isdistinguished from acknowledgement, in that confirmation

or ratification cures a defect of nullity, whileacknowledgement remedies deficiency of proof.

E.g. RATIFICATION contract entered into througherror is approved by a party after discovering hiserror

E.g. ACKNOWLEDGEMENT when what has beenagreed upon orally is put in writing, or when aprivate document is converted into a publicinstrument

Requisites of Ratification (1) That the contract is a voidable or annullable contract,

or one in which the consent of one party is defective,either because of lack of capacity to contract orbecause of error, fraud, violence, intimidation orundue influence.

(2) That the ratification is made with knowledge of thecause for nullity.

(3) That at the time the ratification is made, the cause ofnullity has already ceased to exist.

Transmission of right


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The right to ratify is transmitted to the heirs of the partyentitled to such right.

Art. 1393

Express Ratification

This article does not define the nature and requisites ofexpress ratification. As to the nature, it seems clear that anyoral or written manifestation of the person entitled to ask forannulment that he agrees to be bound by the contract orthat he will not seek its annulment, would be expressratification. As to the requisites, they are the same as thosefor implied ratification; it is only in the form that these twokinds of ratification differ.

Implied Ratification The ratification of an annullable contract may be impliedfrom the conduct or acts of the party entitled to ask for

annulment. Any act evincing an intent to abide by thecontract is evidence of the affirmance of the contract and awaiver of the right to ask for annulment. It may take diverseforms, such as by silence or acquiescence; by acts showingapproval or adoption of the contract; or by acceptance andretention of benefits flowing therefrom.

E.g. Where a minor has entered into a contract ofsale, instead of asking for annulment, upon reachingthe age of majority, and with knowledge of thenullity, spends the greater part of the proceeds fromthe sale, or proceeds to collect the unpaid balance ofthe purchase price, there is tacit ratification.

Art. 1394

Exercise of Ratification The right to ratify pertains to the incapacitated person;hence, during the existence of incapacity, it may beexercised by the guardian for him.

Art. 1395

Art. 1396

Effect of Ratification

After a contract has been validly ratified, no action to annulthe same can be maintained based upon defects relating toits original validity.

Retroactivity of Ratification

Ratification, in the sense of confirmation, is merelydeclaratory of the waiver of the right to ask for annulment.Hence, its effects retroact to the moment when the contractwas entered into. This retroactivity does not prejudice therights of third persons acquired before the ratification.

E.g. a minor sells a piece of land to X; after attainingmajority he sells the same land to Y, but later on heconfirms the previous sale made to X. thisconfirmation cannot prejudice the rights of Y.

Art. 1397

Personal Requisites

Two different requisites are necessary to confer the capacityfor the exercise of the action for annulment of contracts.First, the plaintiff must have an interest in the contract.Second, the victim and not the party responsible for thedefect is the person who must assert the same.

Incapacitated Persons at Fault If the incapacitated person has acted with fraud in order toinduce the other party to enter into the contract, neither henor his legal representative can ask for the annulment of thecontract.

When the incapacitated person has employed

violence or intimidation on the other party, havinghimself employed illicit means to make the otherenter into the contract, the reason for conferringupon him the privilege of annulling the contractceases.

Representation of Capacity Our Supreme Court has applied the doctrine of estoppel incases where the incapacitated person has misrepresentedhimself as having capacity to the person with whom hecontracts, holding that a minor is estopped under such


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circumstances to assert his minority but there is a verysound and strong dissent to such view.

Art. 1398