RESCISSIBLE CONTRACTS Defective Contracts Under the present Code, there are four defective contracts: (1) The

e rescissible contract, which is a contract that has caused a particular damage to one of the parties or to a third person, and which for equitable reasons may be set aside even if it is valid. (2) The voidable or annullable contract, which is a contract in which the consent of one party is defective, either because of want of capacity or because it is vitiated, but which contract is valid until set aside by a competent court. (3) The unenforceable contract, which is a contract that for some reason cannot be enforced, unless it is ratified 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 been executed or entered into. Relative Ineffectiveness These are contracts which are ineffective only with respect to 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 as regards 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 third person, is ineffective as to the latter. A relatively ineffective contract is distinguished from the voidable contract in that its ineffectiveness, with respect to the party concerned, is produced ipso jure, while a voidable contract does not become inoperative unless an action to annul it is instituted and allowed. It differs from the void or inexistent contract, in that the ineffectiveness of the latter is

absolute, because it cannot be ratified, while the relative ineffective contract can be made completely effective by the consent of the person as to whom it is ineffective, or by the cessation of the impediment which prevents its complete effectiveness. Art. 1380 Concept of Rescission Rescission is a remedy granted by law to the contracting parties and even to third persons, to secure the reparation of damages caused to them by a contract, even if this should be valid, by means of the restoration of things prior to the celebration of said contract. Nature of Contract The present article means that even if a contract is valid, it can be rescinded, but does not limit rescission to valid contracts. Rescission is perfectly compatible with the validity of the contract, but it does not require such validity as an essential condition. Hence, a voidable contract may also be rescinded. Rescission in Reciprocal Obligations Article 1991 provides that the power to rescind obligations is deemed implied in reciprocal ones, whenever one of the obligors does not comply with what is incumbent upon him. The effect of such rescission of the obligation are provided in article 1190. That rescission of reciprocal obligations IS NOT identical to rescission of contracts. They have some similarities: (1) both presuppose contracts validly entered into and existing (this distinguishes rescission from annulment, in which there is a defect which vitiates the contract), and (2) both require mutual restitution when 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

chapter may be demanded by a third party prejudiced by the contract. (2) Rescission under article 1191 may be denied by the court when there is sufficient reason to justify extension of time to the defendant in which to perform, while such reason does not affect the right to ask for rescission under this chapter. (3) Non-performance is the only ground for the right to rescission under article 1191, while there are various reasons of equity provided as grounds for rescission under this chapter. (4) Rescission under article 1191 applies only to reciprocal obligations where one party has not performed, while rescission under this chapter applies whether the contract produces unilateral or reciprocal obligations and even when the contract has been fully fulfilled. Rescission and Mutual Dissent Rescission should also be clearly distinguished from an agreement of the parties to cancel their contract and mutually return the object and cause thereof. Courts have sometimes loosely called this act of the parties as rescission, 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 damaged suffered by him (article 1383). (3) The person demanding rescission must be able to return whatever he may be obliged to restore if rescission is granted (article 1385). (4) The things which are the object of the contract must not have passed legally to the possession of a third person acting in good faith (article 1385). (5) The action for rescission must be brought within the prescriptive period of four years (article 1389).

Direct Proceedings to Rescind Rescindible contracts are not void, and until set aside in a rescissory action they are legally effective, convey title, and cannot be attacked collaterally upon the grounds for rescission. Art. 1381 Rescission on Legal Grounds A valid contract can be rescinded ONLY FOR LEGAL CAUSE. E.g. where the transfer and assignment by the defendants to their brothers of a sugar cane mill was ineffective and invalid because of the objection of their father who was a co-owner thereof, the subsequent sale by the defendants to the plaintiff of the same mill in good faith and at the latters insistent requests and evidenced by a document acknowledged 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 entered into by guardians for their wards, or by trustees or administrators for the absentees represented by them, are rescissible if the party represented suffers lesion by more than one-fourth of the value of the things which are the objects of the contract. Lesion is the injury which one of the parties suffers by virtue of a contract which is disadvantageous for him. To give rise to rescission, the lesion MUST HAVE BEEN KNOWN or COULD HAVE BEEN KNOWN at the time of making the contract, and not due to the circumstances subsequent thereto or unknown to the parties. The idea is to establish parity between the value of the thing and its price, so that if the price is less than the true value of the thing at the time of perfection of the contract, there is a lesion. Our Code admits the principle of lesion only in special cases, such as those provided in the present

article, in article 1098 on partition of inheritance, and in 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 the approval of the court. A guardian is authorized only to manage the estate of his ward; hence he has no power to dispose of any portion thereof without approval of the court. He cannot, without judicial approval, enter into any contract which would be more than a mere act of administration. In case, of SALE, MORTGAGE, or OTHER ENCUMBRANCE of real estate, the requisites, procedure, and court approval, provided for by the Rules of Court, are indispensable. Hence, if such contracts of disposition ARE NOT approved by the court, they are UNENFORCEABLE under paragraph 1 of article 1403 of the Code, irrespective of whether there is lesion or not. They are not rescissible. What contracts, then, entered into by the guardian for his war are rescissible UNDER THE PRESENT ARTICLE? The law here must be limited to contracts which constitute mere ACTS OF ADMINISTRATION. E.g. the purchase of equipment for the cultivation of lands belonging to the ward These contracts would not require court approval, because they are made in the ordinary course of the management of the estate of the ward. If the required lesion exists, they are rescissible. XPN: But even if such lesion exists, the contract cannot be rescinded, IF THE GUARDIAN has secured the approval of the guardianship court for such contract (article 1386).

Contracts for Absentees The powers and duties of a legal representative of an absentee, appointed by the court, are the same as those of guardians (article 382). Therefore, the principles discussed in 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 prejudice the rights of creditors, and should not be confused with those entered into without such intention, even if, as a consequence thereof, some particular damage may be caused to a creditor; the existence of the intention to prejudice creditors should be determined, either by the presumption established by article 1387 or by the proofs presented in the trial of the case. Accion Pauliana and Simulation The rescissory action to set aside contracts in fraud of creditors is known as accion pauliana. It differs from an action to declare a contract as absolutely simulated or fictitious on the following points: (1) In the case of rescission, there is a REAL alienation, but it is fraudulent; in the case of simulation, there is in fact no alienation but a mere pretense that one has been made. (2) The former can be alleged only by creditors prior to the act; the latter by all creditors, before or after the simulation. (3) Impossibility of satisfying the plaintiffs claim is required in the first; it is not required in the latter. (4) The accion pauliana is an action to set aside a valid contract; while an action to declare simulation does not seek to set aside the simulated contract, but merely to declare its inexistence. Requisites for Rescission The following are necessary in order that a contract may be rescinded as one made in fraud of creditors:

(1) That the plaintiff asking for rescission has a credit prior to the alienation, although demandable later; (2) That the debtor has made a subsequent contract conveying 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 the conveyance 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 an ACCOMPLICE in the fraud. Existence of Credit Only creditors can ask for the rescission of the contract, and the mere fact that a person filed a suit against the debtor and secured an attachment is not sufficient evidence that the latter owes him anything. Priority of Credit Rescission requires the existence of creditors AT THE TIME OF THE FRAUDULENT ALIENATION, and this must be proved as one of the basis of the judicial pronouncement setting aside the contract; without prior existing debts, there can be neither injury nor fraud. The credit must be existing at the time of the fraudulent alienation, even if it is not yet due. But at the time the accion pauliana is brought, the credit must already be due. Therefore, credits with suspensive term or condition are excluded, because the accion pauliana presupposes a judgement and unsatisfied execution, which cannot exist when the debt is not yet demandable at the time the rescissory action is brought. Note: Rescission is a subsidiary action, which presupposes that the creditor has exhausted the property of the debtor, which is impossible in credits which cannot be enforced because of the term or condition.

While it is necessary that the credit of the plaintiff in the accion pauliana must be prior to the fraudulent alienation, the date of the judgement enforcing it is immaterial. Even if the judgement be subsequent to the alienation, it is merely declaratory, with retroactive effect to the date when the credit was constituted. XPN Accion pauliana may be availed of even when the alienation is prior to the credit, when the debtor purposely and in bad faith deprives himself of the ability to meet the consequences of obligations he intends to incur in the future. The alienation can be rescinded if it was made precisely in view of such future obligation and for the purpose of depriving in advance the creditor of the guaranty on which he could have relied. Furthermore, there are parties who may appear to have become creditors after the alienation, but who may be considered as having a prior right and entitled to the accion pauliana. (1) Those whose claims were acknowledged by the debtor after the alienation, but the origin of which antedated the alienation; the recognition does not give rise to the credit, but merely confirms its existence. E.g. claims for damages arising before the alienation, but acknowledged by the debtor only after the alienation. (2) Those who become subrogated, after the alienation, in the rights of creditors whose credits were prior to the alienation. Creditors Included The remedy of rescission is available to all creditors who were 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 made by a debtor eleven days AFTER A JUDGEMENT

against him has become final, said sale is presumed to have been effected in fraud, not only of the judgement creditor, but also of other legitimate creditors by virtue of debts owing long before the said sale; and although these latter creditors did not obtain A JUDGEMENT until a couple of months after the sale, it is indisputable that they have been defrauded by such sale. Even secured creditors or lienholders are entitled to the accion pauliana.

It is not sufficient that it is founded on good consideration or is made with bona fide intent; it must have both elements. Test as to whether or not a conveyance is fraudulent is, does It prejudice the rights of creditors?

Fraudulent Conveyance It must be shown that the conveyance was fraudulent or with intent to prejudice creditors of the party making the conveyance. 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 circumstances giving rise to the presumption of fraud, if such presumption is overcome by sufficient evidence, the creditor must prove facts showing actual fraudulent intent on the part of the debtor. EVIDENCE: If the case is not one for which the law establishes a presumption of fraud, the creditor seeking the rescission of the contract must prove by competent evidence the existence of such fraud. Without such proof of fraudulent intent, the contract CANNOT be rescinded. Test of Fraud In determining whether or not a certain conveyance is fraudulent, the question in every case is whether the conveyance was a bona fide transaction or a trick and contrivance to defeat creditors, or whether it conserves to the debtor a special right.

The fraud that justifies the accion pauliana is not characterized by the intention to injure the creditor, but by the knowledge that damage would be inflicted. This knowledge exists when the debtor knows that his property cannot be alienated without producing evident injury to his creditors with existing claims, whether they be due or not yet due. As to Transferee As to the transferee, a distinction is made between those who acquire by onerous title and those by gratuitous title. When the alienation is gratuitous, the good faith of the transferee does not protect him, because he gave nothing and so he is not prejudiced by the rescission. But if the alienation is by onerous title, the transferee must be a party to the fraud; if he acts in good faith, there can be no rescission, because having given something, his position would be similar to that of the creditor, and being already in possession his acquisition will be respected. No Other Remedy In order that rescission of a contract made in fraud of creditors can be decreed, it is necessary that the complaining creditors must prove that they cannot recover in any other manner what is due them. The action for rescission is essentially subsidiary. The alienation must have been prejudicial to the creditor, it must have had the effect of making the debtor insolvent, having diminished his property to such an extent that he cannot pay the debt. Creditors Benefitted

GR: The rescission should benefit only the creditor who obtained the rescission, because the rescission is to repair the injury caused to him by the fraudulent alienation (article 1384). XPN: Balance But there may be other creditors who could also bring (it is not necessary that they also brought an action, it is sufficient that they could bring the action) the accion pauliana; they should be given the benefit of rescission, instead of requiring them to bring other rescissory actions, if a balance is left after satisfying the claim of the creditor who brought the action. However, creditors who became such only after the fraudulent alienation, and who themselves could not have asked for rescission, cannot benefit from the rescission. Contracts on Things in Litigation The fourth paragraph of this article refers to a contract executed by the defendant in a suit involving the ownership or possession of a thing, when such contract is made without the knowledge and approval of the plaintiff or the court. E.g. Where X has brought an action to recover possession of a piece of land from Y, and during the pendency of the action Y sells the land to Z, the sale is rescissible and may be set aside at the instance of X 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 remedy of rescission in this case is given to a third person who is not a party to the contract (in the example given above, the parties to the contract is Y and Z, X is a third party). But while in the rescission of a contract in fraud of creditors a personal right is protected by giving it the guaranty of the debtors property, in the rescission of a contract on things in litigation a real right (because plaintiff is asserting

OWNERSHIP over the thing in litigation) is rendered effective with 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 land registry or records showing any legal obstacles to the transfer, the transferee of a property in litigation, who (3) acquires the same in good faith and (4) for valuable consideration, (5) without knowledge or notice of the litigation or claim of the plaintiff, cannot be deprived of such property by a rescissory action. The good faith of the transferee protects him, and rescission will not lie. But where the transferee knew of the claim of the plaintiff, either actually or constructively through the registry, he acts in bad faith, and the transfer can be resincded. If the transfer is gratuitous, the transferee loses nothing by the rescission, and the contract may be rescinded even if he acted in good faith. Art. 1382 Payment When Insolvent When a debtor transfers property to a creditor allegedly in payment of a debt which has not yet matured, at a time when the debtor is insolvent, and when the consideration for the transfer is grossly inadequate, compared to the actual value 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 and owing and enforceable at the time the deed of sale was made, the conveyance will not fall under 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

the debtor did not have properties with which to satisfy his creditor except that which was given in payment insolvency in fact, need not institute any judicial proceeding to declare debtor insolvent or to obtain a judgement or execution) Art. 1383 No Other Remedy The plaintiff asking for rescission must prove that he has no other legal means to obtain reparation. The action for rescission is but a subsidiary remedy, available only when the aggrieved party has no other legal means to obtain reparation 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 the amount of the prejudice suffered by the creditor. As to the excess, the alienation is maintained. If the claim of the creditor is less than the value of the thing fraudulently alienated, the excess remains with the transferee, even if he had acted in bad faith, because the alienation is valid. Under the present article, only the creditor who brought the action can benefit from the rescission, and only to the extent of his unsatisfied credit. Who May Bring Action The action for rescission may be instituted by (1) the person who is injured by the rescissible contract, such as the ward or absentee in the case of lesion, the creditors prejudiced by a fraudulent alienation, and the plaintiff in a case where a thing in litigation is alienated by the defendant; (2) the heirs of these persons; and (3) their creditors by virtue of the right granted by article 1177.

The right of an heir of the injured part to bring the action for rescission is clear. But where a person has made a fraudulent alienation for the purpose of depriving his compulsory heir of his legitime, can the latter institute the rescissory action? He may do so after the death of the debtor, not as representative of the later, but as a creditor with respect to the legitime. Art. 1385 Mtutual Restitution The only possible application of the rule that the party seeking rescission must offer to restore that which he has received from the other, is in contracts executed by guardians or administrators under Nos. 1 and 2, article 1381. Transfer to Third Person The acquisition by a third person is an obstacle to the efficaciousness of the action for rescission, where the following two circumstances are present: (1) that such third person is in lawful possession of the realty, that is to say, he is protected by the law against said action by the registration of the transfer to him in the registry; and (2) that he did not act in bad faith. Thus, a valid transfer to a third person who acquires the property in good faith is sufficient to defeat the action for rescission. But if the third person acted in bad faith and he cannot return the thing upon the rescission of the contract, he will be liable for the value of the property to the party entitled to the rescission. Right of Transferee The right of the transferee to retain the property fraudulently alienated by a debtor, depends upon the nature of the transfer and the complicity of the former in the fraud. If the transfer is gratuitous (nature), the creditor will have a better right than the transferee who was given nothing and who would unjustly be enriched at the expense of the creditor if the transfer were upheld. The rescission will, therefore, be allowed, irrespective of the good of bad faith

(complicity) of the transferee. But if the transfer was by onerous title (nature), the transferee in good faith (complicity) is protected. The transferee who acquired ownership must be maintained in his rights. As between two persons who both stand to suffer loss, the possessor of the property should be preferred in that possession, the OWNERSHIP having been transferred by delivery. To permit rescission when the alienation is by onerous title, the transferee must be a party to the fraud (complicity); that is, he must have knowledge that the transfer to him would prejudice 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 expense of another. But being a possessor in good faith, he is not obliged to pay the fruits received by him He is entitled to reimbursement for necessary and useful expenses incurred on the thing He returns the thing in the condition that it may be found; he is not liable for losses or deteriorations (XPN: he has acted with fraudulent intent or negligence after judicial summons) Transferee in Bad Faith The transferee in bad faith is not entitled to indemnity for damages from the debtor, in the event that rescission is decreed. But can the transferee in bad faith at least recover what he has paid to the debtor? If the price exists in the patrimony of the debtor, as contemplated by the Roman rule, then the accion pauliana would not lie, because then there would still be 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 no reimbursement. Right to Damages When the contract cannot be rescinded, because the thing has been acquired in good faith by a third person, the party who caused the loss shall be liable for damages. This would include the guardian of minors, the representative or administrator of absentees, the transferee in bad faith of things fraudulently alienated by a debtor, or the defendant who has transferred the thing in litigation, in the proper cases. Art. 1386 Art. 1387 Fraud Presumed In the absence of satisfactory evidence to the contrary, the alienation was held fraudulent because it was made AFTER A JUDGEMENT had been rendered against the debtor making the alienation. This presumption, however, does not apply where the alienation of property was MADE BEFORE THE JUDGEMENT against the transferor was rendered. To raise the presumption of fraud in case of attachment, it is enough that it be ISSUED. Any alienation after such issuance of an attachment, even if made before service or execution of such attachment, will be presumed fraudulent. Rebuttal of Presumption The presumption of fraud established by this article is not conclusive, and may be rebutted by satisfactory and convincing evidence. It is necessary to establish affirmatively that the conveyance was made in good faith and for a sufficient and valuable consideration. Proof of these two circumstances is sufficient to negative the existence of fraud.

When the presumption of fraud has been satisfactorily overthrown, it is incumbent upon the party asking for rescission to prove by sufficient evidence that there was actual mala fides in the alienation; otherwise, the contract will not be rescinded. Effect of Fraud The existence of fraud, whether presumed or proved, does not necessarily make the alienation rescissible. Fraud is only one of the requisites for the accion pauliana. And even if the debtor who made the alienation acted fraudulently, if the transferee acquired the thing in good faith and for valuable consideration, 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 have definitely left the patrimony of the debtor and beyond the reach of the creditor (article 1385 (2)). Hence, the subsequent transferee, even if he knows that the first transfer was fraudulent on the part of the debtor, can no longer be held liable. XPN: the debtor and such subsequent transferee had connived to make the first transferee as a mere innocent intermediary in which case the second transferee would still be liable. If the first transferee, however, acted in bad faith, and then he alienates the property to another, the rescissible character of the second alienation depends upon how the subsequent transferee acquired the thing. If the second transferee acted in good faith, the transfer to him cannot be rescinded, and since t:he property cannot be returned, the first transferee will have to indemnify for damages; the subsequent transferee is not liable for damages. But if the second transferee also acts in bad faith, he can be required to return the property; the first

transferee cannot be held liable for damages where such return is possible. But if the property cannot be returned, the transferees shall be successively liable for damages. Note: The same rule applies where the subsequent transferee, although acting in good faith, received the property 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 the transferor to defraud the latters creditors. It is enough that the transferee knows of the intention of the transferor to defraud creditors. If the conditions of the sale, and other circumstances, should awaken suspicion on the part of the vendee, but he does not make an inquiry to verify the fraud, then he will be charged with knowledge thereof. Art. 1389 Minority of Party A minor who is a party to a contract of sale must bring the action for rescission within four years after attaining the age of majority, because under the present article the claim for rescission prescribes in four years from removal of ones incapacity. VOIDABLE CONTRACTS Concept of Voidable Contracts Voidable or annullable contracts are existent, valid, and binding, although they can be annulled because of want of capacity or vitiated consent of one of the parties; but before annulment, they are effective and obligatory between the parties. Hence, it is valid until it is set aside and its validity may be assailed only in an action for that purpose. They can be confirmed or ratified. Incapacity to Consent

The capacity of a party is not a requisite sine-qua non of a contract; its want is only a ground for annulment. The failure to incorporate the idea in our Code is a serious defect. Who can reasonably maintain the existence of a contract entered into 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, not by special or affirmative defense, but by counterclaim which asks for positive action of the court to set aside the contract. It will not be enough for the court to declare that the contract is voidable and relieve the defendant of its effects; it must annul or set aside the contract and order mutual restitution in accordance with article 1398. In this respect, the voidable contract differs from the void contract. In the latter, the court merely declares the contract as void and inexistent, which is its condition from the very beginning, and therefore the attack against its validity can be made collaterally or indirectly. But in the former (voidable contract), the court has first to set aside and render ineffective by its judgement the contract which theretofore is valid and producing legal effect, before the defendant can be exempt from compliance therewith; hence, the attack against its validity must be directly made in an action or in a counterclaim for that purpose, with the consequences flowing from the declaration of nullity. Art. 1391 Prescription of Nullity Extinctive prescription applies, not only to the action for annulment, but also to the defense of nullity. Hence, if the period of prescription has already expired, the nullity of the contract can no longer be set up as a defense to an action to enforce the same. After the action has prescribed, the contract can no longer be set aside. The action prescribes in four years.

Application of Period The period of prescription provided in this article, such as the four year limitation in case of fraud, applies to the parties to the contract but not to third persons. Registered Documents Discovery of fraud must be reckoned to have taken place from the time the document was registered in the office of the register of deeds, for the familiar rule is that registration is a notice to the whole world. Art. 1392 Ratification and Acknowledgement Confirmation, or ratification as it is now called, is that act or means bu which efficacy is given to a contract or an obligation which suffers from a vice of curable nullity. It is distinguished from acknowledgement, in that confirmation or ratification cures a defect of nullity, while acknowledgement remedies deficiency of proof. E.g. RATIFICATION contract entered into through error is approved by a party after discovering his error E.g. ACKNOWLEDGEMENT when what has been agreed upon orally is put in writing, or when a private document is converted into a public instrument 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 or because of error, fraud, violence, intimidation or undue influence. (2) That the ratification is made with knowledge of the cause for nullity. (3) That at the time the ratification is made, the cause of nullity has already ceased to exist. Transmission of right

The right to ratify is transmitted to the heirs of the party entitled to such right. Art. 1393 Express Ratification This article does not define the nature and requisites of express ratification. As to the nature, it seems clear that any oral or written manifestation of the person entitled to ask for annulment that he agrees to be bound by the contract or that he will not seek its annulment, would be express ratification. As to the requisites, they are the same as those for implied ratification; it is only in the form that these two kinds of ratification differ. Implied Ratification The ratification of an annullable contract may be implied from the conduct or acts of the party entitled to ask for annulment. Any act evincing an intent to abide by the contract is evidence of the affirmance of the contract and a waiver of the right to ask for annulment. It may take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. E.g. Where a minor has entered into a contract of sale, instead of asking for annulment, upon reaching the age of majority, and with knowledge of the nullity, spends the greater part of the proceeds from the sale, or proceeds to collect the unpaid balance of the 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 be exercised by the guardian for him. Art. 1395 Art. 1396 Effect of Ratification

After a contract has been validly ratified, no action to annul the same can be maintained based upon defects relating to its original validity. Retroactivity of Ratification Ratification, in the sense of confirmation, is merely declaratory of the waiver of the right to ask for annulment. Hence, its effects retroact to the moment when the contract was entered into. This retroactivity does not prejudice the rights of third persons acquired before the ratification. E.g. a minor sells a piece of land to X; after attaining majority he sells the same land to Y, but later on he confirms the previous sale made to X. this confirmation cannot prejudice the rights of Y. Art. 1397 Personal Requisites Two different requisites are necessary to confer the capacity for 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 the defect is the person who must assert the same. Incapacitated Persons at Fault If the incapacitated person has acted with fraud in order to induce the other party to enter into the contract, neither he nor his legal representative can ask for the annulment of the contract. When the incapacitated person has employed violence or intimidation on the other party, having himself employed illicit means to make the other enter into the contract, the reason for conferring upon him the privilege of annulling the contract ceases. Representation of Capacity Our Supreme Court has applied the doctrine of estoppel in cases where the incapacitated person has misrepresented himself as having capacity to the person with whom he contracts, holding that a minor is estopped under such

circumstances to assert his minority but there is a very sound and strong dissent to such view. Art. 1398