RESCISSIBLE CONTRACTS

Note that the action for rescission cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the damage. (Article 1383)

Rescission shall only be to the extent necessary to cover the damages. (Article 1384)

"Rescission creates the obligation to return the things which were the object of the contract, together with the fruits, and the price with interest; consequently, it can be carried out only when he who demands rescission can return whatever he may be obliged to restore.

Neither shall rescission take place when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.

In this case, indemnity for damages may be demanded from the person

Causing the loss." (Article 1385)

Q43. X sold to Y a piece of land in fraud of Z (X's creditor). Y took legal possession of the land. If there are no other means to satisfy the credits owing the creditors, may the sale to Y be rescinded?

Q44. In 2014, A sold to B a piece of land for Php500,000 in fraud of C (A's creditor) who knew of the fraud. B took possession of the land, but later on C was able to successfully rescind the contract in 2016. What must be returned by A and B to each other?

Q45. In Q34, if C files the suit to rescind the contract in 2020, will it prosper?

Note that the action for rescission, except in cases of guardianship or absentees, must be commenced within four (4) years, that is, four (4) years from the date the contract was entered into.