Kinds of Defective Contracts 1

KINDS OF
DEFECTIVE
CONTRACTS
Part 1
Four Kinds of Defective Contracts
• Recissible Contracts
• Voidable Contracts
• Unenforceable Contracts
• Void or Inexistent Contracts
Rescissible Contracts
• Article 1380
• Contracts validly agreed upon may be rescinded in the
cases established by law. (1290)
• A rescissible contract is one which contains all the essential
requisites of a contract which make it valid, but by reasons of
injury or damage to either of the contracting parties or to third
person, such as creditors, may be rescinded.
Characteristics of a Rescissible contract
• It has all the elements of a valid contract;
• It has a defect consisting in an injury to one of the contracting parties or third
person, generally in the form of economic damage or lesion, fraud, alienation of
property subject of case in court without the consent of the litigants or of the
court;
• It is valid and effective until rescinded;
• It can be attacked only directly, either by one of the contracting parties or by an
affected third person, who is injured or defrauded by the contract;
• It is susceptible of convalidation only by prescription. Ratification process does
not apply.
Article 1381
• The following contracts are rescissible:
• (1) Those which are entered into by guardians whenever the wards whom they represent
suffer lesion by more than one-fourth of the value of the things which are the object thereof;
• (2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in
the preceding number;
• (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 they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial
authority;
• (5) All other contracts specially declared by law to be subject to rescission. (1291a)
• Art. 1382.
• Payments made in a state of insolvency for obligations to whose
fulfillment the debtor could not be compelled at the time they
were effected, are also rescissible. (1292)
• Art. 1383.
• The action for rescission is subsidiary; it cannot be instituted except when
the party suffering damage has no other legal means to obtain
reparation for the same. (1294)
• Art. 1384.
• Rescission shall be only to the extent necessary to cover the
damages caused. (n)
• Art. 1385.
• Rescission creates the obligation to return the things which were the object of the
contract, together with their fruits, and the price with its 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. (1295)
• Art. 1386.
• Rescission referred to in Nos. 1 and 2 of Article 1381 shall not take place with
respect to contracts approved by the courts. (1296a)
Article 1387
• All contracts by virtue of which the debtor alienates property by gratuitous
title are presumed to have been entered into in fraud of creditors, when the donor
did not reserve sufficient property to pay all debts contracted before the donation.
• Alienations by onerous title are also presumed fraudulent when made
by persons against whom some judgment has been issued.
• The decision or attachment need not refer to the property alienated, and need not

have been obtained by the party seeking the rescission.
• In addition to these presumptions, the design to defraud creditors may be proved
in any other manner recognized by the law of evidence. (1297a)
• Art. 1388.
• Whoever acquires 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.
If there are two or more alienations, the first acquirer shall be liable first, and
so on successively. (1298a)
• Art. 1389.
• 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 latter is known. (1299)

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KINDS OF

• consequently, it can be carried out only when he who demands rescission can

• The decision or attachment need not refer to the property alienated, and need not

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